New York has sued the prediction market platform Kalshi, alleging it operates as an illegal, unlicensed gambling operation, according to a lawsuit filed Friday by New York Attorney General Letitia James. The state contends that Kalshi's operations rely more on chance than skill, thus violating New York's gambling laws.
The lawsuit does not explicitly seek to shut down Kalshi but could impact its ability to operate within the state. Kalshi maintains that its event contracts are federally regulated derivatives and fall outside the purview of state gaming laws. The company argues that New York's action attempts to circumvent federal oversight.
"It's sad to see this type of political theater from the leadership in our own state. States can’t just shut down a federally licensed exchange," Elisabeth Diana, Kalshi's Head of Communications, told ABC News. "This would also hurt New Yorkers, who would be driven offshore. We love New York, we love New Yorkers, and New Yorkers love our product."
New York Governor Kathy Hochul stated, "Kalshi has chosen to ignore New York’s gambling laws, which exist to protect consumers, prevent problematic gambling, deliver funding for critical public services and ensure that every company plays by the same rules."
James asserted that regardless of how Kalshi brands itself, it functions as a gambling platform. The lawsuit further alleges that Kalshi violates state laws by permitting wagering on events involving New York college teams and allowing sports betting for individuals under 21.
The lawsuit seeks a court order compelling Kalshi to comply with state regulators and taxes, forfeit any illegal profits, and provide restitution to users nationwide. A statement of facts accompanying the lawsuit suggests these penalties could amount to an estimated $36 billion.
The Commodity Futures Trading Commission, which considers prediction markets to be within its exclusive jurisdiction, has filed for a temporary restraining order to halt New York's lawsuit. The commission views these markets as its regulatory domain.