New York Takes Legal Action Against Kalshi, Calling Its Prediction Market a Gambling Operation

The lawsuit seeks to stop Kalshi from operating what New York describes as an unlicensed gambling operation and also requests financial compensation.

New York has filed a lawsuit against prediction-market platform Kalshi, accusing the company of offering sports and event-based wagering in the state without obtaining the required gaming license.

The complaint, submitted to the New York Supreme Court on Friday, asks the court to prohibit Kalshi from continuing to run what officials call an unauthorized gambling business. It also requests a review of customer wagers, losses, and company revenue, along with restitution, damages, and civil penalties.

According to a statement from Governor Kathy Hochul and Attorney General Letitia James, New York is seeking a penalty equal to three times the profits Kalshi earned from the alleged activity, along with an additional $100,000 for every unauthorized or attempted sports or mobile sports wagering offering.

“New York’s gambling regulations are designed to protect minors and address gambling addiction risks,” James said in the statement. She argued that prediction markets such as Kalshi should be treated as gambling platforms regardless of how they describe their services.

Kalshi, which pursued a $40 billion valuation during a June fundraising round, is among several prediction-market companies facing regulatory challenges across the United States. In Minnesota, Kalshi and rival platform Polymarket recently received a temporary legal victory after a federal court found that the state’s restrictions on prediction markets may conflict with the Commodity Exchange Act. The court issued a preliminary injunction preventing enforcement of the law against the companies and the Commodity Futures Trading Commission.

Kalshi spokesperson Elisabeth Diana criticized New York’s legal action, calling it political maneuvering. She argued that states cannot simply block a federally regulated exchange and warned that restricting domestic platforms could push users toward offshore alternatives. She added that the company values its relationship with New York and its residents.

The New York attorney general’s office characterized Kalshi’s event contracts as wagers, claiming the platform offers markets tied to professional and college sports, elections, and cultural events. The lawsuit alleges that Kalshi permits users between 18 and 20 years old to place bets and provides markets involving New York college teams, activities that licensed sportsbooks in the state are not allowed to offer.

Kalshi’s user growth accelerated during the World Cup, with the company adding 3 million users throughout the tournament, according to CNBC. That figure more than doubled its reported user base of 2 million at the beginning of May.

The attorney general’s office said the lawsuit follows an October cease-and-desist order issued by the New York State Gaming Commission.

A federal judge previously rejected Kalshi’s attempt to prevent state regulators from intervening, denying its request on July 7 and later refusing an injunction while the company pursued an appeal on July 27.