New York sues Kalshi over prediction market gambling claims

New York officials sued Kalshi on Friday, accusing the New York-based prediction market platform of running an illegal, unlicensed gambling operation and escalating a fight between states and federal regulators over who controls the fast-growing industry.

The petition, filed in state court in Manhattan by Attorney General Letitia James, seeks to stop Kalshi’s operations in New York, force the company to pay restitution to consumers, forfeit profits and pay fines equal to three times the amount it has generated through its operations in the state. James said Kalshi has not obtained a license from the New York State Gaming Commission “in any capacity.”

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

Kalshi allows users to trade contracts tied to the outcomes of sports, elections and other events. New York’s petition says the platform amounts to gambling because people can wager on events they do not control, such as who will win the Super Bowl or the reality TV show “Big Brother.” The state also objected to Kalshi allowing 18- to 20-year-olds to use the platform, while New York’s minimum age for mobile sports betting is 21.

Gov. Kathy Hochul said Kalshi “has chosen to ignore New York’s gaming laws,” which she said are intended to protect consumers, prevent problem gambling, fund public services and ensure companies operate under the same rules. “This choice has consequences,” Hochul said.

Kalshi rejected the lawsuit and said it is federally licensed. Spokeswoman Elisabeth Diana told CBS News the company had recently been in talks with New York officials about ways it could partner with the state. “It’s sad to see this type of political theater from the leadership in our own state,” she said. “States can’t just shut down a federally licensed exchange. This would also hurt New Yorkers, who would be driven offshore. We love New York, we love New Yorkers, and New Yorkers love our product.”

According to Al Jazeera, Kalshi sought to move the case to Manhattan federal court eight hours after James filed it. In a filing, the company said New York “seeks to place itself in the position of a nationwide derivatives regulator” and that the lawsuit seeks to “fundamentally subvert the exclusive jurisdiction of the CFTC.”

The case is part of a broader clash over prediction markets. The Commodity Futures Trading Commission, the federal agency that oversees prediction markets, says Congress gave it exclusive jurisdiction over the platforms and has challenged regulatory actions in at least nine states, including New York. States argue that much of the business on prediction market platforms is sports betting, which they are empowered to regulate, and not the commodities or futures contracts overseen by the CFTC.

Al Jazeera reported that the CFTC filed an emergency motion late Thursday in federal court to stop New York from applying state gambling laws to Kalshi, calling the move overreach that would irreparably harm the agency and the markets it regulates.

Prediction markets have grown sharply since the 2024 U.S. presidential election. The combined monthly global trading volume on Kalshi and Polymarket rose from less than $5 billion in September 2025 to about $24 billion as of April 2026, according to the Pew Research Center. Americans, by comparison, bet an average of $14 billion a month on legal sports betting sites, Pew found.

James filed similar petitions in April against Coinbase Financial Markets and Gemini Titan, saying their event contracts were “quintessentially” gambling, Al Jazeera reported. At least four states — Massachusetts, Michigan, Nevada and Washington — have won court orders restricting Kalshi’s activities. On Monday, a federal judge temporarily blocked Minnesota’s first-in-the-nation law banning prediction markets days before it was to take effect.