New York has taken its fight against prediction markets to court, with Governor Kathy Hochul and Attorney General Letitia James announcing that the state has sued Kalshi, alleging the company is running an illegal gambling business.
The lawsuit, filed in New York Supreme Court, seeks a permanent order blocking Kalshi from operating in the state and requires the company to give up its alleged profits, compensate customers, and provide a full accounting of wagers and losses.
New York argues that Kalshi is operating an unlicensed gambling business by offering contracts on sports, elections, and other future events without a New York gaming license.
Kalshi launched its prediction market platform in 2021 and expanded into sports markets in January 2025, promoting those offerings as "legal sports markets, accessible to Americans in all 50 states," according to the petition.
New York argues that those contracts amount to unlawful gambling because customers risk money on future contingent events outside their control while Kalshi does not hold a state gaming license.
The company has become a multibillion-dollar business while operating outside New York's gambling regulatory framework, the petition states, adding that Kalshi seeks to avoid the "legal and financial consequences of New York's close regulation of gambling" by offering "what is quintessentially wagering under the guise of 'event contracts' on a 'prediction market'."
The complaint alleges Kalshi has violated multiple provisions of New York law, including constitutional restrictions on unauthorized gambling, criminal gambling statutes, sports wagering laws, and the federal Wire Act.
State lawyers are asking the court to permanently block the company from operating in New York while also ordering restitution, disgorgement, an accounting of customer activity, and statutory penalties.
New York has requested assignment to the Commercial Division and estimates the value of the requested accounting and related monetary relief at roughly $36 billion, in addition to broad injunctive relief and statutory penalties.
The lawsuit comes as New York continues increasing oversight of prediction markets and related financial platforms, following a series of moves targeting prediction markets, including an executive order prohibiting covered state employees from using confidential government information to profit from prediction market trades.
The state also cites growing public scrutiny of prediction markets and says unlicensed platforms warrant closer regulatory attention.
State Sen. Joseph Addabbo Jr. has proposed legislation that would establish a regulated framework for prediction markets in New York rather than leaving the activity unlicensed or offshore.
Friday's lawsuit represents New York's most aggressive challenge yet against Kalshi, along with seeking to halt the company's operations in the state, the attorney general's office is asking the court to require Kalshi to surrender its alleged illegal gains, compensate affected consumers, and pay significant civil penalties.
