New York sues Kalshi over alleged illegal gambling operationThe lawsuit adds to a growing clash between New York and the CFTC over whether federally regulated prediction markets are subject to state gambling laws.
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New York State has filed a lawsuit against prediction market platform Kalshi, accusing the company of operating an illegal and unlicensed gambling business by offering contracts on sports, elections, and other event outcomes. The lawsuit seeks to halt Kalshi’s operations in New York, demand forfeiture of illegal profits, provide restitution to users, and impose civil penalties triple the amount of those gains. New York Attorney General Letitia James described Kalshi and similar prediction markets as gambling platforms and emphasized the state’s intent to enforce its laws for consumer protection.
This legal action follows a cease-and-desist order issued by the New York State Gaming Commission to Kalshi in October 2025, which led Kalshi to sue the regulator in federal court. Kalshi’s attempts to obtain preliminary injunctions against the enforcement have been denied by both a district judge and an appeals court. In response, Kalshi criticized New York’s approach as “political theater” and argued that states cannot simply shut down a federally licensed exchange, warning that such enforcement would drive New Yorkers to offshore platforms.
The lawsuit intensifies an ongoing jurisdictional conflict between New York and the Commodity Futures Trading Commission (CFTC). The CFTC recently filed an emergency motion to block New York’s enforcement, asserting that federal law grants it exclusive authority to regulate designated contract markets like Kalshi under the Commodity Exchange Act. The agency has similarly contested state restrictions in at least nine other states, highlighting concerns about conflicting regulations undermining federal commodities oversight.
Kalshi competes in an expanding prediction market sector that has gained traction alongside major sporting events. The company began integrating blockchain technology in late 2025 by launching tokenized prediction markets on Solana and other blockchain networks. Analytics firm Chainalysis reported that blockchain-based prediction markets handled about $20 billion in trades linked to the 2026 FIFA World Cup, involving over 400,000 wallets, illustrating the growing mainstream interest in this type of market.