- New York Attorney General Letitia James filed a lawsuit on July 31, 2026, alleging Kalshi operates an illegal, unlicensed gambling platform through its prediction markets.
- The state seeks at least $36 billion in damages, treble penalties, full restitution, and a temporary restraining order to stop event contracts in New York.
- Officials claim the platform allows users under 21 to wager and bypasses state gaming taxes and licensing requirements.
- Kalshi, a CFTC-registered exchange, called the action “political theater” and noted states cannot shut down a federally licensed platform.
- The CFTC filed an emergency motion shortly before the suit, seeking to block New York enforcement against registered prediction markets.
New York Attorney General Letitia James and Governor Kathy Hochul announced on July 31 that the state has sued prediction market operator KalshiEX, LLC, accusing it of running an illegal gambling operation. The petition, filed in Manhattan state court, seeks a court order to halt Kalshi’s activities in the state, full restitution to users, disgorgement of all proceeds, and penalties equal to three times the company’s gains—figures that court filings put at a minimum of $36 billion pending a complete accounting.
According to the official press release, investigators determined that Kalshi’s event contracts on sports, culture, and elections meet New York’s legal definition of gambling because outcomes are uncertain and outside the control of participants. The company has not obtained a license from the New York State Gaming Commission and has allowed users aged 18 to 20 to open accounts, despite the state’s 21-year-old minimum for mobile sports betting. The state also alleges Kalshi has avoided tax obligations that licensed operators pay to fund public services and problem-gambling programs.
“New York’s gambling laws protect children from underage betting and help combat gambling addiction,” James said. “No matter what they call themselves, prediction markets like Kalshi are gambling platforms, plain and simple.” Governor Hochul added that Kalshi “has chosen to ignore New York’s gaming laws” and that “no company is above the law.”
Kalshi, which recorded approximately $33 billion in trading volume in June 2026, responded that the lawsuit represents “political theater” from state leadership. “States can’t just shut down a federally licensed exchange,” the company stated, emphasizing its status as a CFTC-designated contract market.
Hours before the state filing, the Commodity Futures Trading Commission submitted an emergency motion in federal court seeking to restrain New York from pursuing enforcement actions against Kalshi or other CFTC-registered platforms. The agency has argued that federal law grants it exclusive jurisdiction over event contracts and has previously sued multiple states over similar efforts.
The case forms part of a broader legal battle. A federal judge in New York previously denied Kalshi’s request for a preliminary injunction against state enforcement, and several other states—including Michigan and Washington—have obtained temporary restrictions on the platform’s sports-related contracts. The outcome will test the boundary between state gambling regulation and federal oversight of designated contract markets.
