New York Attorney General Sues Prediction Market Kalshi Over Alleged Gambling Law Violations

New York Attorney General Letitia James filed a suit in state court accusing Kalshi, a major prediction-market platform, of operating an illegal gambling business in the state. The complaint alleges the company failed to obtain a required gambling license, did not pay applicable taxes, and permits users younger than the legal age for mobile sports betting to place wagers.

James said the state's gambling statutes are intended to protect minors and curb gambling addiction, adding that prediction markets function as gambling platforms regardless of how they are labeled.

Kalshi responded that the lawsuit represents "political theater" and argued that a federally licensed exchange should not be shut down by a single state, warning that such action could drive New Yorkers to offshore services.

The case follows a series of legal challenges over jurisdiction between state gaming commissions and the Commodity Futures Trading Commission (CFTC), which regulates prediction markets at the federal level. A federal appeals court recently denied Kalshi's request to pause a lower-court ruling that New York's gambling laws may apply despite federal oversight. The CFTC has asked a judge to block New York from pursuing the case, citing exclusive federal jurisdiction.

Other states have similarly targeted Kalshi and comparable platforms. Rhode Island sued Kalshi and Polymarket for unlawful sports betting, while New York previously sued cryptocurrency exchanges Coinbase and Gemini over related allegations. Courts have issued mixed rulings, with some states successfully restricting Kalshi's operations and others allowing the platforms to continue.

The lawsuit seeks an injunction against Kalshi's activities in New York, as well as fines, restitution, and forfeiture of profits.