New York sued KalshiEX LLC on 31 July, saying the prediction-market platform was running an illegal, unlicensed gambling business in the state and should be stopped from continuing its operations there. The state asked the court to force Kalshi to forfeit gains tied to New York users, pay restitution to bettors and face penalties, including triple the company’s gains and $100,000 for each unauthorized sports wager.
According to the New York Attorney General’s office, the case rests on the claim that Kalshi launched in 2021 to let users bet money on future events, then expanded in January 2025 into sports “trading” and marketed legal sports betting to users nationwide. The office said its investigation found the business to be an illegal, unlicensed gambling operation.
Hours later, the Northeast Times reported, the Commodity Futures Trading Commission went to federal court to try to block New York’s case entirely. The agency argued that it has exclusive jurisdiction over event contracts traded on CFTC-licensed exchanges, turning the dispute into a direct test of whether Kalshi’s sports-event contracts are financial derivatives beyond a state’s reach or wagers dressed in exchange-trading language.
The state’s filing says Kalshi never obtained a licence from the New York State Gaming Commission and never paid the taxes that licensed sportsbooks pay on New York revenue. The attorney general’s office said gambling tax receipts help fund public schools, sports programmes for underserved youth, and problem-gambling education and treatment.
New York also says Kalshi’s platform is open to users aged 18 to 20, below the state’s 21-plus minimum for mobile sports betting. The complaint says the company reported a $22 billion valuation and $178 billion in annualised transaction volume, while the $36 billion damages request is a floor that could rise after a full accounting of Kalshi’s New York activity.
Kalshi has pushed back hard. In comments carried by Daily News, the company called the state case political theatre and argued that New York cannot use its own courts to shut down a federally licensed exchange.
Governor Kathy Hochul and Attorney General Letitia James have framed the case as a consumer-protection fight. James said prediction markets like Kalshi are gambling platforms, while Hochul said the company had chosen to ignore New York’s gaming laws and that no company is above the law.
The clash did not begin with this summer’s lawsuit. New York’s Gaming Commission issued a cease-and-desist order on 24 October 2025, Kalshi sued two days later in federal court, and the state agreed not to pursue enforcement while that injunction request was pending. On 7 July, a federal judge denied Kalshi’s request for a preliminary injunction.
A separate opinion in the case said the merits centred on whether New York gambling laws are preempted by federal law as applied to Kalshi’s sports-event contracts, and found they are not. The judge also noted that under New York law, gambling enterprises offering sports gaming must be licensed by the state gaming commission.
The dispute is part of a broader series of state-federal fights over prediction markets. Nevada reached an agreement with Kalshi requiring geolocation blocks, Wisconsin declined to block state enforcement, Minnesota temporarily blocked a state ban, and the Sixth Circuit has heard arguments involving Ohio and Tennessee. Kalshi and rival Polymarket together face at least 20 lawsuits nationwide.
