TL;DR
New York has escalated its fight over prediction markets, filing a sweeping lawsuit that accuses Kalshi of running illegal gambling products without a state license. The complaint, submitted in Manhattan state court by Governor Kathy Hochul and Attorney General Letitia James, seeks to block the platform from operating in the state and demands significant financial penalties, restitution, and forfeiture of profits.
According to the attorney general’s office, the lawsuit argues that Kalshi allows users to wager on sports, culture, elections, and other real‑world outcomes without approval from the New York State Gaming Commission. Officials say these event contracts meet the legal definition of gambling and that the platform exposed residents to personal and financial risk.
New York also filed a motion for a temporary restraining order to halt relevant event contracts and compel Kalshi to pay restitution, disgorge proceeds, and face penalties equal to three times its gains. Court filings indicate that compensatory damages could reach at least $36 billion, pending a full accounting. Hochul said the state’s laws exist to protect consumers and ensure companies follow uniform rules, while James reiterated that prediction markets like Kalshi are gambling platforms under state law.
The lawsuit arrives amid a broader jurisdictional battle over whether event contracts fall under federal commodities regulation or state gambling oversight. Earlier this week, a federal judge again declined to block New York from enforcing its gambling laws against Kalshi, even as the Commodity Futures Trading Commission sought its own restraining order to prevent states from pursuing actions against CFTC‑registered platforms.
Kalshi has faced similar pushback nationwide. Judges in Michigan and Washington recently issued temporary restraining orders blocking the platform from offering sports‑related contracts, while Minnesota temporarily shielded Kalshi and Polymarket from enforcement under a new state ban. Attorney Daniel Wallach noted that New York’s broad civil enforcement powers could allow the state to seek nationwide disgorgement, potentially making the $36 billion estimate conservative.
The explosive rise of prediction markets has intensified regulatory scrutiny. Kalshi remains the largest platform by trading volume, reaching $33 billion in June, while Polymarket recorded $13.95 billion across its U.S. operations. New York has also sued similar offerings from Coinbase and Gemini, arguing they provide unlicensed gambling services. International regulators have taken action as well, with bans in Argentina, Spain, Brazil, and Indonesia.
