New York State filed a lawsuit on July 31, 2026, against prediction market platform Kalshi, accusing it of operating an illegal, unlicensed gambling business by offering event contracts on sports, elections, and cultural outcomes without a state gaming license.

Attorney General Letitia James and Governor Kathy Hochul announced the action in New York Supreme Court in Manhattan. The state seeks at least $36 billion in compensatory damages pending a full accounting of operations, along with a temporary restraining order to stop Kalshi’s event contracts in New York immediately, restitution to users, disgorgement of gains, and civil penalties equal to three times those gains. It also demands a $100,000 fine for each unauthorized sports wagering offer under state racing law.

Core Allegations Against the Platform

The complaint asserts that Kalshi’s contracts meet New York’s legal definition of gambling because users risk money on uncertain future events outside their control or dependent on chance. The platform has never obtained a license from the New York State Gaming Commission and has not paid the taxes required of licensed operators that support schools, youth programs, and problem-gambling treatment.

State investigators created accounts and placed real test wagers from New York, including contracts on a college basketball game and a reality television competition, which completed without restriction. The filing further alleges that Kalshi allowed users aged 18 to 20 to participate, below the state’s 21-year minimum for mobile sports betting, and offered markets on games involving New York college teams, which licensed sportsbooks are barred from accepting.

The suit also includes a count under the federal Interstate Wire Act, claiming Kalshi transmitted bets across state lines via wire communications. Officials said the platform exposes residents, including those under the legal gambling age, to personal and financial risks while sidestepping consumer protections and tax obligations.

Remedies Sought and Scale of Claimed Activity

Beyond the temporary restraining order and permanent injunction, New York demands a complete accounting of every customer bet and loss processed through the platform. The $36 billion figure exceeds Kalshi’s reported valuation of roughly $22 billion. The state cited platform activity showing users wagered more than $1 billion monthly in 2025, with about 90 percent concentrated on sports contracts.

Kalshi has reported annualized transaction volume near $178 billion and recently added millions of users during major sporting events. The per-offer fine structure under racing law could generate substantial additional sums given the volume of sports-related contracts.

Background of Regulatory Conflict

The lawsuit follows a cease-and-desist order issued by the New York State Gaming Commission in October 2025. Kalshi sued state officials in federal court seeking to block enforcement. A district judge denied the company’s request for a preliminary injunction on July 7, ruling that federal commodities law does not preempt New York’s gambling statutes with respect to the sports-event contracts at issue. Subsequent emergency requests were also denied, including by the Second Circuit shortly before the state filing.

Kalshi maintains it is a designated contract market registered with the Commodity Futures Trading Commission since 2020 and therefore subject to exclusive federal oversight under the Commodity Exchange Act. Company representatives have described the New York action as political theater and argued that states cannot shut down a federally licensed exchange, warning that restrictions could drive users to offshore platforms.

Just before the state suit was filed, the Commodity Futures Trading Commission submitted an emergency motion in federal court seeking to restrain New York from pursuing enforcement against Kalshi and similar platforms. The agency contends that state actions interfere with its exclusive authority and risk creating conflicting rules that undermine federal commodities regulation. The CFTC has advanced similar positions in disputes involving multiple other states.

Broader Industry Pressure

Kalshi faces parallel challenges in several jurisdictions. Courts in Michigan, Nevada, and Washington have issued orders restricting its sports-related contracts, while a Minnesota court recently blocked enforcement of that state’s ban on prediction markets, allowing operations to continue pending litigation. A coalition of state attorneys general has supported efforts in other cases challenging federal claims of exclusive jurisdiction over sports event contracts.

The New York action also follows earlier petitions by the attorney general against other platforms offering event contracts. Prediction markets have drawn increased scrutiny as trading volumes have grown around major events, with some operators expanding into blockchain-based products. The outcome of the New York case and related federal proceedings will influence how event contracts are treated across state and federal lines.