New York's attorney general on Friday initiated legal action against Kalshi, alleging the company operates a prediction market platform in violation of state gambling statutes. The complaint, filed in Manhattan state court by Attorney General Letitia James, says Kalshi did not obtain a license from the New York State Gaming Commission to run its service, where users place trades based on the expected outcomes of events ranging from sporting contests to political results.
The petition argues that Kalshi's offering is functionally gambling because participants stake money on results they cannot control, for example naming the winner of the Super Bowl or a reality television competition such as "Big Brother." The attorney general also criticized Kalshi for allowing people aged 18 to 20 to use the platform, pointing out that New York law sets a 21-year minimum age for mobile sports betting.
In a statement, James said the state's gambling laws are designed to shield minors from underage wagering and to address gambling addiction. "No matter what they call themselves, prediction markets like Kalshi are gambling platforms, plain and simple," she said.
New York Governor Kathy Hochul also weighed in, stating that Kalshi's disregard for the state's gaming rules has consequences and emphasizing those rules exist to protect consumers, curb problematic gambling, provide funding for essential public services, and ensure a level regulatory playing field among businesses.
The suit follows similar legal petitions filed in April against two other market operators, Coinbase Financial Markets and Gemini Titan. It arrives as prediction markets have surged in popularity since the 2024 U.S. presidential election, a period when some of these platforms reportedly outperformed traditional pollsters in forecasting the outcome of the contest between Donald Trump and Kamala Harris. That expansion has generated a wave of litigation and counter-litigation focusing on whether individual states or the federal government should regulate the sector.
Federal regulators have asserted authority as well. The U.S. Commodity Futures Trading Commission has claimed exclusive oversight of prediction markets and has challenged regulatory measures taken by at least nine states. Kalshi itself sought to prevent New York from applying its gambling laws by filing a preemptive federal lawsuit in October, but that effort has faced setbacks.
On Tuesday, a federal appeals court in Manhattan turned back Kalshi's request for relief while the company appeals a July 8 decision denying a preliminary injunction that would have blocked New York's enforcement. U.S. District Judge Analisa Torres previously concluded that the state's interests in preventing gambling addiction, preserving the integrity of sports, and avoiding a proliferation of unregulated contracts outweighed Kalshi's asserted federal-law concerns and operational hardships for customers.
Legal actions in other states have also limited Kalshi's operations. At least four states - Massachusetts, Michigan, Nevada and Washington - have obtained court orders restricting the company's activities.
New York's lawsuit asks the court to halt Kalshi's allegedly unlawful conduct in the state, to force the forfeiture of purportedly illegal gains, to impose civil penalties equal to three times those gains, and to provide restitution to affected customers. The company and its attorneys did not immediately provide comment outside of normal business hours.
Context and industry implications
Prediction markets such as Kalshi and Polymarket have become more visible following the 2024 election cycle. That heightened visibility has led to growing regulatory scrutiny from state authorities and engagement by federal regulators, creating legal conflict over jurisdiction and consumer protections. The disputes involve questions about gambling laws, age limits for wagering, addiction prevention, and which level of government is empowered to oversee these novel trading platforms.