New York Sues Kalshi Over “Illegal Gambling Operation” Claims | LeapRate

New York has filed a lawsuit against prediction market platform Kalshi, accusing the company of running an “illegal, unlicensed gambling operation” within the state. The suit, announced Friday by Governor Kathy Hochul and Attorney General Letitia James, seeks to halt Kalshi’s operations in New York and force the company to forfeit profits earned there.

The filing makes New York the latest state to challenge Kalshi and similar platforms amid a broader dispute with the Trump administration over regulatory authority in the fast-growing prediction market sector. Kalshi maintains it operates as a federally licensed and regulated exchange, arguing that states lack jurisdiction over its business.

“States can’t just shut down a federally licensed exchange,” said Kalshi spokesperson Elisabeth Diana, adding that such action would push New Yorkers toward offshore alternatives.

James countered that regardless of branding, prediction markets function as gambling platforms and must comply with state law. Her office is seeking forfeiture of illegal gains, restitution for affected consumers, and penalties amounting to three times Kalshi’s profits.

The lawsuit alleges Kalshi failed to secure licensing from the state Gaming Commission, avoided tax obligations imposed on licensed casinos and sports betting operators, and permitted users as young as 18, below New York’s mobile betting age requirement of 21.

Kalshi and other prediction market firms argue their platforms differ fundamentally from gambling, functioning more like markets where users trade against each other, with pricing driven by trading activity rather than odds set by a house.

This case adds to a growing web of legal battles nationwide, following similar action by New York against Coinbase and Gemini in April, as states and federal regulators continue clashing over prediction market oversight.