New York Sues Kalshi Over Alleged Illegal Gambling Operation

New York Sues Prediction Market Platform Kalshi

State officials are seeking a permanent injunction to halt Kalshi’s operations in New York, full restitution for consumers who placed trades on the platform, and financial penalties. The state’s requests include fines equal to three times the company’s alleged illegal gains, alongside a $100,000 penalty for each attempt to offer sports wagering, with total estimates potentially reaching $36 billion according to CNBC.

No matter what they call themselves, prediction markets like Kalshi are gambling platforms, plain and simple, Attorney General James said in a statement reported by Nbcnews. She added that the state’s gambling laws protect children from underage betting and help combat gambling addiction.

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State Regulations and Federal Jurisdiction Dispute

The lawsuit centers on a broader conflict between state governments and federal authorities regarding who holds the authority to regulate fast-growing prediction markets. New York officials argue that Kalshi’s offerings meet the legal definition of gambling because users bet on uncertain events outside their control, such as sports outcomes or reality television shows like “Big Brother.”

Furthermore, the state points out that Kalshi failed to obtain a license from the New York State Gaming Commission and permitted individuals aged 18 to 20 to use its platform, whereas New York mobile sports betting requires users to be at least 21 years old.

Conversely, Kalshi and other prediction market platforms maintain that they are federally licensed and regulated by the U.S. Commodity Futures Trading Commission (CFTC), arguing that states possess no authority to govern them. Platforms argue they function like stock markets where consumers trade against one another rather than against a traditional house.

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It’s sad to see this type of political theater from the leadership in our own state, Elisabeth Diana, a spokesperson for the New York-based Kalshi, said in a statement published by WNYT. States can’t just shut down a federally licensed exchange. This would also hurt New Yorkers, who would be driven offshore.

Wider Legal Battles Across the United States

The legal confrontation involves multiple intersecting lawsuits and emergency motions. In April, the CFTC sued the state of New York, and less than an hour before New York filed its latest lawsuit against Kalshi, the federal commission filed an emergency motion in Manhattan federal court to stop the state’s enforcement activity, terming it an overreach.

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The federal filing followed a rejection by a federal appeals court in Manhattan of Kalshi’s request to avoid New York’s gambling laws while it appeals a July 8 ruling by U.S. District Judge Analisa Torres, who refused to issue an injunction against the state. Meanwhile, at least four states—Massachusetts, Michigan, Nevada, and Washington—have secured court orders restricting Kalshi’s activities.

The American Gaming Association praised New York’s legal action. Bill Miller, the association’s president and CEO, stated that the organization applauded the state for taking necessary action to uphold the rule of law and protect traditional gaming industry interests.