New York Sues Kalshi, Alleges Illegal Gambling Operation

New York officials have filed a lawsuit against the prediction market platform Kalshi, accusing it of operating an illegal, unlicensed gambling operation. The state is seeking to halt Kalshi’s operations and compel the company to forfeit its profits, reportedly totaling billions of dollars.

What Happened

New York officials, including Governor Kathy Hochul and Attorney General Letitia James, announced a lawsuit against prediction market platform Kalshi on Friday, July 31, 2026, according to the Baltimore Sun. The lawsuit, filed in state Supreme Court in Manhattan, characterizes Kalshi as an “illegal, unlicensed gambling operation” and specifically mentions sports wagering as part of its activities, as reported by AP News and CNBC. The state is seeking to stop Kalshi’s operations and mandate the company to forfeit its profits, an amount that could reportedly reach billions of dollars, with a court filing from state officials providing a rough estimate of $36 billion in damages and costs sought by the lawsuit.

Attorney General James stated that “prediction markets like Kalshi are gambling platforms, plain and simple” and that the company is “harming New Yorkers in the process” by ignoring state laws (Governor Hochul and Attorney General James Announce New York Has Sued Kalshi). This legal action follows a similar lawsuit filed by New York in April against other prediction market platforms, Coinbase and Gemini, also alleging illegal gambling operations, according to the Baltimore Sun.

Key Details

• New York’s lawsuit claims Kalshi operates as an “illegal, unlicensed gambling operation” that includes sports wagering (Baltimore Sun).
• State officials are seeking to halt Kalshi’s operations and compel the company to forfeit its profits, with a reported estimate of $36 billion in potential damages and costs (Baltimore Sun).
• New York argues that prediction markets meet the legal definition of gambling because outcomes are uncertain, outside user control, or hinge on chance (Baltimore Sun).
• Kalshi reportedly allows users aged 18 to 20, while New York requires mobile sports betting users to be at least 21 years old (Baltimore Sun).
• Kalshi spokesperson Elisabeth Diana stated that “states can’t just shut down a federally licensed exchange” and that such action would “hurt New Yorkers” by driving them offshore (Baltimore Sun).

Why It Matters

This lawsuit intensifies a growing dispute between states and prediction market platforms regarding regulatory authority. New York officials assert that prediction markets, including Kalshi, fail to obtain state licenses and avoid tax obligations akin to licensed casinos and mobile sports gambling platforms (Baltimore Sun). The state also cites concerns about underage betting, stating that Kalshi permits users as young as 18, whereas New York mandates a minimum age of 21 for mobile sports betting (Baltimore Sun). The outcome of this and similar lawsuits could significantly impact the regulatory landscape for prediction markets, defining the boundaries of state versus federal oversight and potentially setting precedents for how these platforms operate within regulated markets.

What’s Next

This lawsuit is part of a larger, ongoing legal conflict, as New York joins other states in challenging prediction market platforms, according to the Baltimore Sun. Kalshi had reportedly been in negotiations with New York officials concerning tax and consumer protection issues prior to the lawsuit (Baltimore Sun). Kalshi previously filed a federal lawsuit against the New York Gaming Commission in October 2025, which remains pending, after the commission ordered the company to cease what it termed “illegal operating” in New York (Baltimore Sun). The broader dispute also involves federal intervention, with the U.S. Commodity Futures Trading Commission asserting exclusive jurisdiction over prediction markets, stating it “will no longer sit idly by” while states attempt to regulate or ban them (Baltimore Sun). Federal judges have recently issued temporary blocks against similar laws in Minnesota and Arizona, suggesting a complex and protracted legal battle ahead, as reported by the Baltimore Sun.

Originally reported by Baltimore Sun·Published 31 Jul 2026, 12:34