New York regulatory authorities have taken legal action against the prediction markets operator Kalshi, accusing it of running an unlicensed gambling business within the state. On July 31, 2026, Governor Kathy Hochul and Attorney General Letitia James announced that the state filed a petition against KalshiEX, LLC in Manhattan state court.
Authorities contend that Kalshi’s platform, accessible via website and mobile app, effectively functions as a gambling operation by allowing users to place positions on the outcomes of sports contests, cultural events, elections, and other uncertain future developments.
Under New York law, gambling remains broadly prohibited except for specifically authorized and licensed activities overseen by the New York State Gaming Commission.
The complaint asserts that Kalshi never secured such a license, thereby avoiding the regulatory requirements, consumer safeguards, and tax obligations that apply to licensed casinos and mobile sports wagering operators.
State investigators determined that the contracts offered on the platform meet the legal definition of gambling.
Outcomes depend on events beyond any individual participant’s control or involve elements of chance.
Officials further note that the service has been available to individuals younger than 21, the minimum age for legal mobile sports betting in New York, potentially exposing younger users to elevated personal and financial risks associated with problem gambling.
The lawsuit follows earlier enforcement steps.
In October 2025, the Gaming Commission issued a cease-and-desist directive to Kalshi concerning sports-related offerings.
Kalshi responded by suing state officials in federal court, arguing that its event contracts fall under exclusive federal oversight by the Commodity Futures Trading Commission (CFTC) as a designated contract market.
A federal district judge rejected Kalshi’s request for a preliminary injunction in early July 2026, and an appeals court later declined to provide interim relief while the matter proceeds.
The state action came shortly afterward.
In the petition, the Attorney General’s office seeks a court order permanently barring Kalshi from continuing unlicensed operations in New York.
Additional remedies requested include forfeiture of all profits derived from the alleged illegal activity, restitution to affected customers, and civil penalties set at three times the amount of those gains.
One report indicated that compensatory damages sought could reach at least $36 billion subject to a full accounting, alongside per-offering penalties.
Attorney General Letitia James emphasized that state gambling statutes exist to shield residents, particularly younger people, from addiction risks and unregulated wagering.
She described prediction markets of this type as gambling platforms regardless of the terminology used.
The case forms part of a broader pattern of New York enforcement.
Similar petitions were previously filed against platforms operated by Coinbase and Gemini.
Multiple other states have also pursued restrictions or court orders limiting Kalshi’s activities.
Prediction markets have grown rapidly in popularity by letting participants trade contracts tied to real-world events.
Proponents frame them as information-aggregation tools or financial instruments.
Regulators in New York and elsewhere counter that when the contracts center on sports and similar contingencies without proper state licensing, they cross into prohibited gambling territory and undermine carefully constructed consumer protections and revenue frameworks.
The litigation underscores ongoing tension between federal commodities regulation and traditional state authority over gambling.
Kalshi maintains that its CFTC-registered status should preempt state interference. New York authorities insist that the substance of the activity, not its packaging, determines the applicable rules. The case continues as both sides prepare further arguments in state court.