New York state officials have filed a lawsuit against Kalshi, the federally regulated prediction market, accusing the company of running an illegal gambling business in defiance of state laws. The suit, announced Friday, alleges Kalshi has operated without a license from the state gaming commission and has failed to pay required taxes, all while flouting regulations designed to protect consumers.
Governor Kathy Hochul (D) said in a statement that Kalshi's actions constitute a "flagrant disregard" for New York's gaming laws, which she said exist to shield the public from harmful gambling practices and to fund essential services. She added that the state, working alongside Attorney General Letitia James, is moving to halt the platform's operations and force compliance, asserting that "no company is above the law."
The lawsuit specifically points to Kalshi's allowance of users aged 18 and older, which conflicts with a state prohibition on sports betting for anyone under 21. The state is seeking a court order to bar Kalshi from operating without a license, require restitution to users, and force the company to forfeit any profits gained through its alleged illegal activities. Additionally, the state is demanding a fine equal to three times Kalshi's earnings, plus $100,000 for each unlicensed sports betting offer made.
Attorney General James characterized prediction markets as gambling platforms "plain and simple," regardless of how they are branded. "No matter what they call themselves, prediction markets like Kalshi are gambling platforms, plain and simple," she said.
Kalshi has pushed back, with communications head Elisabeth Diana calling the lawsuit "political theater." She argued that states cannot simply shut down a federally licensed exchange, and warned that such action would drive New Yorkers to offshore platforms. "We love New York, we love New Yorkers, and New Yorkers love our product," she added.
The dispute highlights a growing clash between state regulators and the booming prediction market industry, which insists it is distinct from gambling and falls under the oversight of the Commodity Futures Trading Commission (CFTC). The CFTC, under Chair Mike Selig, has backed this position and has already sued New York in April over similar actions against cryptocurrency firms Coinbase and Gemini. On Thursday, the CFTC sought a temporary restraining order to block what it called the state's "increasingly aggressive attempts to assert jurisdiction" over prediction markets, noting that officials could next target Kalshi.
This legal battle comes as voting restrictions and other state-level policies remain contentious issues. The outcome could set a precedent for how prediction markets are regulated across the country, with implications for both the industry and state gaming oversight.
