New York Attorney General sues prediction-market platform Kalshi over alleged illegal gambling

New York Attorney General Letitia James announced on Friday that the state has filed a lawsuit against Kalshi, a prediction-market platform headquartered in Manhattan, alleging that the company conducts an illegal gambling operation by offering wagers without registration with the New York State Gaming Commission. The complaint seeks a permanent injunction, restitution for users who placed trades, a $100,000 penalty for each instance of sports wagering, and additional fines equal to three times the profits the firm earned while allegedly violating state law.

Governor Kathy Hochul said the action is intended to stop illegal activity and bring Kalshi into compliance with New York law. Kalshi responded that it is disappointed with the lawsuit, describing the state's move as "political theater" and asserting that a federally licensed exchange cannot be shut down by a single state.

The legal dispute follows a recent federal court decision that denied Kalshi’s request for a preliminary injunction and temporary restraining order against the state Gaming Commission. The Commodity Futures Trading Commission, which regulates prediction markets at the federal level, has also filed for a temporary restraining order to block New York’s enforcement actions, arguing that event contracts are swaps subject to federal oversight.

The case reflects a broader conflict between state regulators and the CFTC over whether sports-related event contracts constitute gambling, which states regulate, or swaps, which fall under federal jurisdiction. Forty-four state attorneys general have recently challenged the CFTC’s authority to regulate sports-related contracts, filing a letter during a public comment period on the agency’s draft rules for prediction markets.