New York Sues Kalshi for Alleged Illegal Gambling Operation

^{Gov. Kathy Hochul said Kalshi's prediction markets violate New York gambling laws and vowed to bring the platform into compliance through legal action. (Photo: Enrique Shore / Alamy Live News)}

New York officials announced Friday that they have filed a lawsuit against prediction market platform Kalshi, making the state the latest entrant into the nationwide legal battle over whether states have any control over prediction markets and their offerings. The lawsuit could cost Kalshi as much as $36 billion after fines, forfeited profits, and restitution to users are all accounted for.

In a statement released by New York Governor Kathy Hochul and Attorney General Letitia James on July 31, the officials allege that Kalshi is offering “an illegal, unlicensed gambling operation” to residents of New York.

Hochul: Kalshi’s Choices Have ‘Consequences’

The lawsuit seeks a court order to stop Kalshi from offering what the state deems gambling products in the state, and seeks fines equal to three times the company's illegal gains, restitution for affected users, and forfeiture of all profits tied to the alleged violations.

“New York’s gambling laws protect children from underage betting and help combat gambling addiction,” James said in a statement. “No matter what they call themselves, prediction markets like Kalshi are gambling platforms, plain and simple. By ignoring our laws, Kalshi is running an illegal operation and harming New Yorkers in the process. We are taking them to court to uphold our laws and protect New Yorkers.

According to the lawsuit, New York believes that Kalshi’s markets meet the state’s definitions for illegal gambling. The state notes that Kalshi is operating in New York without a license from the state’s gaming commission, doesn’t pay state taxes on its profits, and allows users as young as 18 to trade contracts, despite New York's minimum legal gambling age of 21.

“Kalshi has chosen to ignore New York’s gaming laws, which exist to protect consumers, prevent problematic gambling, deliver funding for critical public services, and ensure that every company plays by the same rules,” Gov. Hochul said in a statement. “This choice has consequences, and working closely with Attorney General James, New York is taking action to stop this illegal behavior and bring Kalshi into compliance, because no company is above the law.”

While this is New York’s most direct salvo at Kalshi and other prediction markets, the New York State Gaming Commission did send a cease-and-desist request to Kalshi in October 2025. The prediction market later filed a federal lawsuit to block enforcement of that same order.

Kalshi Calls Lawsuit ‘Political Theater’

The state has also cracked down on what it sees as illegal gambling throughout 2026. In February, James sued video game developer Valve for promoting gambling in its video games. In April, James also sued both Coinbase and Gemini for allegedly running illegal gambling platforms in the state.

Kalshi and other prediction markets maintain that they are exclusively under the jurisdiction and regulation of the Commodity Futures Trading Commission (CFTC).  The agency has backed prediction markets in court, arguing that state officials lack the authority to regulate the platforms. 

Just hours before New York's lawsuit was announced, the CFTC had already moved in a separate court filing to block New York from taking any enforcement action against Kalshi at all.

The dispute has led to dozens of lawsuits between states and prediction markets nationwide, with no consensus on the ultimately legal outcome as of yet – meaning the most likely outcome is that these cases are eventually resolved in the Supreme Court of the United States.

In a statement for Kalshi, spokesperson Elisabeth Dianna reiterated the company's stance, and referred to the New York lawsuit as “political theater.”

"It's sad to see this type of political theater from the leadership in our own state," Diana said in a statement for Kalshi. "States can't just shut down a federally licensed exchange. This would also hurt New Yorkers, who would be driven offshore. We love New York, we love New Yorkers, and New Yorkers love our product."