New York sues Kalshi, alleges it operates unlicensed gambling business

New York State sued prediction-market platform Kalshi on July 31, 2026, in New York Supreme Court, accusing the company of running an unlicensed gambling operation in violation of state law. Attorney General Letitia James said Kalshi's event contracts, which allow wagering on sports, elections, and cultural events, are illegal bets regardless of how the company frames them.

The lawsuit seeks penalties equal to three times Kalshi's gains from the activity, plus $100,000 for each unauthorized or attempted offer of sports or mobile sports wagering. The state is also seeking a full accounting of customer bets, losses, and company gains, with restitution and civil penalties to follow.

The suit specifically alleges that Kalshi permits underage wagering, allowing users aged 18 to 20 to place bets, and that the platform lists markets on New York college teams, both prohibited for licensed sportsbooks in the state. These allegations go beyond the prediction-market versus gambling definitional dispute and rest on concrete statutory violations, per CoinDesk's reporting.

The filing follows an October 2025 cease-and-desist order from the New York State Gaming Commission. In response, Kalshi challenged New York's enforcement authority in federal court. A federal judge denied Kalshi's bid to block state regulators on July 7 and rejected an injunction pending appeal on July 27, according to CoinDesk, suggesting courts may not view federal CFTC licensing as a shield against state gambling enforcement.

Kalshi's head of communications Elisabeth Diana argued that states cannot shut down a federally licensed exchange, warning that enforcement would drive New Yorkers offshore. The company was targeting a $40 billion valuation during a June funding round and reported 2 million users at the start of May, a figure that grew by approximately 3 million during the World Cup, according to CNBC reporting cited by CoinDesk.

The New York suit mirrors broader state-level resistance to prediction markets. In Minnesota, however, Kalshi and rival Polymarket won a temporary victory when the U.S. District Court for the District of Minnesota ruled the state's law banning prediction markets likely runs afoul of the Commodity Exchange Act and granted a preliminary injunction to the two companies and the CFTC.

The jurisdictional clash remains unresolved: whether federal CFTC oversight of prediction markets preempts state gambling enforcement, or whether states retain concurrent authority to regulate such platforms, will likely hinge on further appeals and potential CFTC guidance.