New York Attorney General sues Kalshi, alleging illegal gambling operation

New York Attorney General Letitia James filed a lawsuit on Friday accusing Kalshi, a prediction-market exchange, of operating an illegal gambling operation in the state. The complaint alleges that Kalshi’s contracts expose New Yorkers, including minors, to gambling addiction and that the platform lacks required safeguards.

"New York's gambling laws protect children from underage betting and help combat gambling addiction," James said. "No matter what they call themselves, prediction markets like Kalshi are gambling platforms, plain and simple."

The state seeks a permanent injunction barring Kalshi from operating without a gaming license and requests monetary penalties estimated at a minimum of $36 billion, including restitution to customers, triple the gains from the alleged illegal activity, and $100,000 for each unlicensed sports-wagering attempt.

Kalshi, which argues that its offerings are commodities trading regulated by the Commodity Futures Trading Commission (CFTC), called the lawsuit "political theater" in a statement, adding that shutting down a federally licensed exchange would drive New Yorkers offshore.

The legal dispute follows similar actions against other prediction-market firms, including Polymarket, and recent state lawsuits against Coinbase and Gemini Titan. Federal courts have previously denied Kalshi’s motions to pause state enforcement, and the CFTC has filed a separate federal suit to contest New York’s authority.

Other states are grappling with comparable issues. Nevada recently required Kalshi to use geolocation technology to block in-state trades, while Wisconsin and Minnesota courts have issued rulings that allow state regulators to enforce gambling laws despite CFTC jurisdiction claims.