New York sues Kalshi as fight over prediction-market oversight escalates
New York state sued prediction-market platform Kalshi on Friday, accusing it of operating an "illegal, unlicensed gambling business." The state is asking a court to order Kalshi to stop operating in New York and to forfeit its illegal proceeds. As the prediction-market industry has grown rapidly, disputes between several states and the federal government over regulatory authority have continued to intensify. The lawsuit further escalates the legal fight over whether prediction markets should be regulated by the states or the federal government. Kalshi spokeswoman Elisabeth Diana said: "It is unfortunate to see the New York state government engage in this kind of political theater. States have no authority to shut down a federally licensed exchange. Ultimately, this will only harm New York residents by forcing them onto offshore platforms." Kalshi is headquartered in New York, according to the source. New York Gov. Kathy Hochul and state Attorney General Letitia James jointly announced that they had filed the lawsuit in the New York State Supreme Court in Manhattan. "New York's gambling laws are designed to prevent minors from participating in gambling and to help curb gambling addiction," James said in a statement. "No matter how they define themselves, prediction markets such as Kalshi are gambling platforms at their core. They disregard New York law, operate illegally and, as a result, harm New York consumers." The New York attorney general's office is asking the court to order Kalshi to surrender all of its illegal proceeds, pay compensation to consumers who were harmed and impose a penalty equal to three times its unlawful proceeds. Kalshi, Polymarket and other prediction-market platforms surged in popularity after the 2024 U.S. presidential election. At the time, their predictions that Republican presidential candidate Donald Trump would defeat Democratic candidate Kamala Harris were more accurate than those of most polling organizations, drawing widespread market attention. Kalshi has reportedly been negotiating with New York regulators in recent weeks over issues including taxes and consumer protection. In April, New York also filed similar lawsuits against prediction-market platforms Coinbase and Gemini, alleging that they were operating illegal gambling businesses. New York state argues that prediction markets meet the legal definition of gambling because "users wager on outcomes of events that are uncertain, are not under the bettors' control and depend on factors of chance." The state also says Kalshi does not hold an operating license issued by the New York State Gaming Commission and has avoided taxes imposed on licensed casinos and mobile sports-betting platforms. In addition, Kalshi allows users ages 18 to 20 to trade, while New York sets the minimum age for mobile sports betting at 21. Prediction-market platforms counter that their operating model is fundamentally different from traditional gambling because users trade with other users rather than with the platform itself. They say the mechanism is more similar to the stock market: Prices are formed through market trading, while the platform collects only trading fees and does not act as a bookmaker taking the other side of the bet. The platforms also argue that under U.S. federal law, the Commodity Futures Trading Commission has exclusive regulatory authority over prediction-market trading. In February, the CFTC chairman appointed by Trump said the commission would "no longer sit idly by as states attempt to regulate or ban prediction markets and undermine the commission's exclusive regulatory authority." State governments counter that most of the platforms' business currently consists of sports betting. They argue that sports betting is legally regulated by the states and falls into a completely different legal category from the commodities and futures contracts regulated by the CFTC. On Monday, a federal judge temporarily blocked Minnesota's forthcoming law, described as the first law in the country to ban prediction markets. The law had been scheduled to take effect several days later, and the ruling dealt a setback to state efforts to restrict or ban prediction markets.
As the prediction-market industry has grown rapidly, disputes between several states and the federal government over regulatory authority have continued to intensify. The lawsuit further escalates the legal fight over whether prediction markets should be regulated by the states or the federal government.
Kalshi spokeswoman Elisabeth Diana said: "It is unfortunate to see the New York state government engage in this kind of political theater. States have no authority to shut down a federally licensed exchange. Ultimately, this will only harm New York residents by forcing them onto offshore platforms." Kalshi is headquartered in New York, according to the source.
New York Gov. Kathy Hochul and state Attorney General Letitia James jointly announced that they had filed the lawsuit in the New York State Supreme Court in Manhattan.
"New York's gambling laws are designed to prevent minors from participating in gambling and to help curb gambling addiction," James said in a statement. "No matter how they define themselves, prediction markets such as Kalshi are gambling platforms at their core. They disregard New York law, operate illegally and, as a result, harm New York consumers."
The New York attorney general's office is asking the court to order Kalshi to surrender all of its illegal proceeds, pay compensation to consumers who were harmed and impose a penalty equal to three times its unlawful proceeds.
Kalshi, Polymarket and other prediction-market platforms surged in popularity after the 2024 U.S. presidential election. At the time, their predictions that Republican presidential candidate Donald Trump would defeat Democratic candidate Kamala Harris were more accurate than those of most polling organizations, drawing widespread market attention.
Kalshi has reportedly been negotiating with New York regulators in recent weeks over issues including taxes and consumer protection. In April, New York also filed similar lawsuits against prediction-market platforms Coinbase and Gemini, alleging that they were operating illegal gambling businesses.
New York state argues that prediction markets meet the legal definition of gambling because "users wager on outcomes of events that are uncertain, are not under the bettors' control and depend on factors of chance."
The state also says Kalshi does not hold an operating license issued by the New York State Gaming Commission and has avoided taxes imposed on licensed casinos and mobile sports-betting platforms. In addition, Kalshi allows users ages 18 to 20 to trade, while New York sets the minimum age for mobile sports betting at 21.
Prediction-market platforms counter that their operating model is fundamentally different from traditional gambling because users trade with other users rather than with the platform itself. They say the mechanism is more similar to the stock market: Prices are formed through market trading, while the platform collects only trading fees and does not act as a bookmaker taking the other side of the bet.
The platforms also argue that under U.S. federal law, the Commodity Futures Trading Commission has exclusive regulatory authority over prediction-market trading. In February, the CFTC chairman appointed by Trump said the commission would "no longer sit idly by as states attempt to regulate or ban prediction markets and undermine the commission's exclusive regulatory authority."
State governments counter that most of the platforms' business currently consists of sports betting. They argue that sports betting is legally regulated by the states and falls into a completely different legal category from the commodities and futures contracts regulated by the CFTC.
On Monday, a federal judge temporarily blocked Minnesota's forthcoming law, described as the first law in the country to ban prediction markets. The law had been scheduled to take effect several days later, and the ruling dealt a setback to state efforts to restrict or ban prediction markets.