New York Attorney General Letitia James filed a lawsuit against prediction market platform Kalshi in New York State court in Manhattan on July 31, 2026. The complaint alleges that the company operates as an illegal, unlicensed gambling operation within the state and seeks to halt its activities.

The lawsuit accuses Kalshi of breaking over half a dozen laws by allowing users to wager on events without proper regulatory oversight. New York seeks to halt Kalshi's operations and force the company to forfeit its profits. The legal action also requests that Kalshi pay restitution to harmed consumers and fines equal to three times the company’s gains. Additionally, New York seeks a nationwide ban on Kalshi to prevent the platform from operating in other jurisdictions.

Attorney General James alleged that Kalshi failed to obtain a license from the New York State Gaming Commission. The petition outlines specific violations regarding age restrictions and the nature of the wagers. The lawsuit alleges Kalshi allowed users aged 18 to 20 to use its platform, despite New York state law requiring a minimum age of 21 for mobile sports betting. According to New York’s petition, Kalshi’s prediction markets are gambling because people can wager on events whose outcomes they don’t control, such as who will win the Super Bowl or the reality TV show "Big Brother."

"No matter what they call themselves, prediction markets like Kalshi are gambling platforms, plain and simple," James said. She added that the state's regulations serve a protective function for residents. "New York’s gambling laws protect children from underage betting and help combat gambling addiction," she said.

New York Governor Kathy Hochul supported the legal action with a statement emphasizing the importance of compliance. "Kalshi has chosen to ignore New York’s gaming laws, which exist to protect consumers, prevent problematic gambling, deliver funding for critical public services, and ensure that every company plays by the same rules," Hochul said. "This choice has consequences."

Kalshi described the lawsuit as "political theater from the leadership in our own state." The company argued that New York seeks to place itself in the position of a nationwide derivatives regulator. Kalshi further argued that through the action, New York seeks to fundamentally subvert the exclusive jurisdiction of the CFTC. Kalshi spokesperson Elisabeth Diana stated, "States can’t just shut down a federally licensed exchange." She warned of potential negative outcomes for local users. "This would also hurt New Yorkers, who would be driven offshore," Diana said.

The American prediction market platform launched in July 2021. Sports betting constitutes more than 90% of Kalshi's site activity and 89% of its revenue in 2025. States counter that the vast majority of the business on prediction market platforms is sport betting.

Kalshi contends that it and other prediction markets are federally licensed exchanges, similar to stock markets, with users trading swaps of cash flows over event outcomes. Prediction markets such as Kalshi and Polymarket have soared in popularity since the 2024 US presidential election. Kalshi and Polymarket fared better than pollsters in predicting Republican Donald Trump’s victory over Democrat Kamala Harris in the 2024 US presidential election.

Legal maneuvers continued immediately after the filing. Kalshi sought to move the lawsuit to Manhattan federal court eight hours after the attorney general filed it. This action followed recent discussions between the parties.

Kalshi had been in negotiations with New York officials in recent weeks over tax and consumer protection issues. A person familiar with the case said negotiations to avoid a lawsuit broke down.

The dispute extends beyond New York. The US Commodity Futures Trading Commission (CFTC) filed an emergency motion in federal court late on Thursday night to stop New York from subjecting Kalshi to state gambling laws. The CFTC called New York's action "overreach" that would irreparably harm the agency and markets it regulates.

The CFTC has claimed exclusive jurisdiction to regulate transactions offered in the prediction market. The federal agency challenged regulatory activity in at least nine states, including New York, which it sued in April. In response, a coalition of 44 state attorneys general wrote to the CFTC arguing it does not have the power to regulate sports-related event contracts.

James has pursued similar actions against other operators. Attorney General James filed similar petitions in April against prediction market operators Coinbase Financial Markets and Gemini Titan. James stated that the event contracts offered by Kalshi, Coinbase Financial Markets, and Gemini Titan were "quintessentially" gambling.

Kalshi pre-emptively sued New York last October to block enforcement activity. In March, Kalshi preemptively sued to block Iowa Attorney General Brenna Bird from taking civil or criminal enforcement action against it. In May, Rhode Island sued Kalshi and Polymarket for unlawful sports betting.

Courts in several states have issued varying rulings on the issue. At least four states — Massachusetts, Michigan, Nevada and Washington — have won court orders restricting Kalshi’s activities. On Wednesday, the federal appeals court in Manhattan rejected Kalshi’s request to avoid possible enforcement activity.

Kalshi is appealing US District Judge Analisa Torres’s refusal on July 8 to issue an injunction against the state. Judge Analisa Torres found the state’s interests in preventing gambling addiction, preserving the integrity of sport, and avoiding a proliferation of unregulated contracts heavily outweighed Kalshi’s interests. Conversely, on Monday, a federal judge temporarily blocked Minnesota’s first-in-the-nation law banning prediction markets. Minnesota Democratic Gov. Tim Walz signed an executive order prohibiting state employees from using inside information to bet on prediction markets. In a separate case in Wisconsin, a judge ruled that the state can regulate prediction markets like gambling. A federal appeals court held a hearing Thursday about similar lawsuits in Ohio and Tennessee.

Why It Matters

This legal battle defines whether states or the federal CFTC hold exclusive authority to regulate prediction markets, a conflict already prompting lawsuits in at least nine states. The outcome determines if platforms operating as federally licensed exchanges can continue offering event contracts or must cease operations to comply with individual state gambling laws. A ruling favoring New York could force users to offshore platforms, while a victory for Kalshi might limit state abilities to enforce consumer protections and age restrictions.