New York has sued prediction market operator Kalshi, seeking to block the company from operating without a state gambling license and recover penalties and gains that could total as much as $36 billion.
The lawsuit, filed Friday by Attorney General Letitia James, alleges that Kalshi operates an illegal gambling platform by allowing users to wager on sports, elections, culture and other events.
The state is seeking restitution for affected consumers, the forfeiture of allegedly illegal gains and fines equal to three times the proceeds generated through gambling activity in New York. The attorney general’s office is also seeking $100,000 for each alleged attempt to contact customers in the state, bringing the potential total to $36 billion.
Kalshi sought Friday to move the case to federal court in Manhattan, arguing that it is a federally regulated futures exchange. New York is expected to challenge the proposed venue change.
The dispute centers on whether Kalshi’s event contracts are financial products overseen by the Commodity Futures Trading Commission or gambling products subject to state licensing, taxation and consumer-protection laws.
“States can’t just shut down a federally licensed exchange,” said Kalshi spokeswoman Elisabeth Diana, calling the lawsuit “political theater.”
New York alleges that Kalshi’s contracts meet the legal definition of gambling because users stake money on uncertain outcomes outside their control. The state said Kalshi avoided licensing and taxes imposed on casinos and mobile sports betting operators.
The CFTC, led by President Donald Trump appointee Michael Selig, has meanwhile sued states, including New York, while asserting federal authority over prediction markets.
“Rather than seek reasoned answers from the courts, Letitia James and New York seek to force an unprecedented sudden shutdown of prediction markets nationwide,” Selig posted Friday on X.
Rather than seek reasoned answers from the courts, Letitia James and New York seek to force an unprecedented sudden shutdown of prediction markets nationwide. The @CFTC has already sued to stop this and will continue to defend its jurisdiction.
— Mike Selig (@ChairmanSelig) July 31, 2026
Kalshi began operating in 2021 and introduced sports trading in 2025, claiming it could legally offer markets nationwide. It has advertised itself using the tagline “Kalshi: Legal in all 50 states.” Online sports betting is legal in 39 states.
The attorney general’s investigation found that Kalshi allows users aged 18 to 20 to participate, while New York requires mobile sports bettors to be at least 21.
“New York’s gambling laws protect children from underage betting and help combat gambling addiction,” said Attorney General James.
“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.”
Before the lawsuit, Kalshi spent weeks negotiating with state officials, a person familiar with the matter told the Wall Street Journal. The company proposed frameworks covering self-exclusion, advertising and other consumer protections.
Kalshi also proposed a tax agreement modeled on North Carolina, where prediction market trades will face a 6% tax, compared with 23% on traditional gambling earnings. The New York proposal would have generated an estimated $10 billion over five years, according to the person.
“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,” Governor Hochul said.
“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.”
The lawsuit follows earlier New York actions against Coinbase and Gemini over prediction markets and a 2025 cease-and-desist order issued to Kalshi by the state Gaming Commission.