New York sues Kalshi, alleges it offers a gambling platform 'plain and simple'

New York State has filed a lawsuit against prediction-market platform Kalshi, accusing the company of operating an unlicensed gambling business within the state. The lawsuit, brought by Attorney General Letitia James and filed in New York Supreme Court, alleges that Kalshi offers event contracts that constitute illegal bets, covering sports, elections, and cultural events, and that it permits underage wagering by users aged 18 to 20. The complaint also notes that some markets involve New York college teams, which licensed sportsbooks are prohibited from featuring in the state.

The state is seeking substantial penalties, including triple the gains Kalshi made from these activities and $100,000 for each unauthorized or attempted wager. Additionally, New York requests a full accounting of all customer bets, losses, and Kalshi’s profits associated with its operations in New York. Attorney General James emphasized the importance of state gambling laws in protecting minors from underage betting and addressing gambling addiction, stating that Kalshi’s prediction markets are, in essence, gambling platforms.

Kalshi, which recently targeted a $40 billion valuation in a June funding round, faces similar legal challenges across the United States. While the New York lawsuit represents a significant regulatory hurdle, the platform recently achieved a temporary legal victory in Minnesota, where a federal court blocked a state law banning prediction markets, citing federal Commodity Exchange Act protections. Kalshi’s head of communications, Elisabeth Diana, criticized New York’s legal actions as "political theater" and argued that shutting down a federally licensed exchange would harm New Yorkers by pushing them toward offshore platforms.

The New York lawsuit follows a cease-and-desist order issued by the New York State Gaming Commission in October, and attempts by Kalshi to block state regulators were denied by a federal judge earlier in July. Kalshi’s growth was notably boosted by the recent World Cup, with active users increasing from 2 million in early May to 3 million according to CNBC, underscoring the platform’s rising popularity despite mounting legal challenges.