New York state filed a lawsuit against prediction market platform Kalshi on July 31, 2026, accusing it of operating an illegal gambling operation without a license from the New York State Gaming Commission [1, 2, 3, 4, 5, 6, 7]. The state demands Kalshi halt all operations in New York, pay restitution to affected customers, forfeit all illegal profits, and pay fines triple the amount of those gains [1, 2, 3, 4, 6, 7].
Attorney General Letitia James said Kalshi’s markets are "gambling platforms, plain and simple," exposing New Yorkers to risks including underage betting. She noted that Kalshi allows users aged 18 to 20 to participate, despite New York law requiring participants be at least 21 [1, 2, 3, 4, 6, 7]. James added, "New York’s gambling laws protect children from underage betting and help combat gambling addiction. We are taking them to court to uphold our laws and protect New Yorkers" [2, 7].
New York Governor Kathy Hochul said Kalshi "has chosen to ignore New York’s gaming laws... This choice has consequences" [1, 2, 3]. The lawsuit alleges Kalshi operates without registering with the state gaming commission, avoiding gambling taxes and consumer protections, while enabling bets on chance-based events that fit the legal definition of gambling [1, 2, 3, 4, 6, 7]. New York also seeks $100,000 penalties per sports wager offered without a license [3].
Kalshi disputes the claims. A company spokesperson said, "It’s sad to see this type of political theatre from the leadership in our own state. States can’t just shut down a federally licensed exchange. This would also hurt New Yorkers, who would be driven offshore" [1]. The firm says it is federally licensed and regulated by the Commodity Futures Trading Commission (CFTC) as an event contracts exchange, not a traditional sportsbook or gambling operation [1, 2, 4, 5, 6]. The CFTC asserts exclusive federal jurisdiction over prediction markets and filed for a temporary restraining order against New York’s enforcement efforts [3, 5, 6].
Kalshi launched in 2021 and expanded into sports event contracts in 2025. It gained public attention during the 2025 New York City mayoral election through election outcome trading markets [4]. The company has faced similar regulatory challenges in Nevada, New Mexico, Arizona, and Washington [5, 7].
Prediction markets like Kalshi pay corporate income taxes at 7.25% in New York, lower than the 51% gaming tax rate on sportsbooks, creating state revenue incentives to classify Kalshi as gambling [8].
Kalshi originally sued New York state in October 2025 after receiving a cease-and-desist letter and having its request for a preliminary injunction denied [3, 4].
The court’s ruling on New York’s lawsuit and the CFTC’s restraining order requests are the next steps in this ongoing legal dispute [3, 4, 5].
