New York sues Kalshi, alleging illegal gambling operation

New York Governor Kathy Hochul and Attorney General Letitia James announced on Friday that the state has filed a lawsuit against Kalshi, a prediction-market operator based in New York. The complaint alleges that Kalshi runs an illegal gambling operation by allowing users to bet on uncertain events without a license from the state gaming commission and by permitting participants as young as 18, below the state-mandated age of 21 for mobile sports betting.

The suit seeks to force Kalshi to forfeit its profits, provide restitution to affected consumers and pay fines equal to three times its earnings. > "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," Hochul said. > "New York’s gambling laws protect children from underage betting and help combat gambling addiction. No matter what they call themselves, prediction markets like Kalshi are gambling platforms, plain and simple," James added.

Kalshi’s spokesperson Elisabeth Diana responded that the lawsuit represents "political theater" and warned that shutting down a federally licensed exchange would push New Yorkers toward offshore services.

Prediction-market platforms argue they differ from traditional gambling because users trade against each other, similar to stock markets, and the U.S. Commodity Futures Trading Commission (CFTC) has exclusive jurisdiction over such contracts. Federal officials have recently signaled resistance to state attempts to regulate these markets, while several states continue to pursue legal action, including Arizona’s criminal charges alleging illegal election betting.

Legal experts note that more than 20 federal lawsuits are pending over whether prediction-market operators should be treated as financial exchanges or gambling businesses. Critics also warn that unregulated prediction markets could increase problem gambling rates.

The Associated Press contributed reporting.