New York filed a lawsuit against prediction market platform Kalshi on Friday, describing the company as an unlicensed gambling operation and seeking to halt its services in the state while forcing it to forfeit its profits.
The suit, filed in state Supreme Court in Manhattan by Governor Kathy Hochul and Attorney General Letitia James, argues that Kalshi’s event-based contracts amount to betting that must comply with the state’s gaming laws. The attorney general’s office is asking the court to order Kalshi to surrender all illegal gains, pay restitution to affected consumers, and pay fines equal to three times the company’s profits.
“No matter what they call themselves, prediction markets like Kalshi are gambling platforms, plain and simple,” James said in a statement, adding that the state’s gambling laws are designed to protect minors from underage betting and to combat addiction.
Prediction markets allow users to trade contracts tied to the outcome of future events, ranging from elections and economic data to sports and cultural developments. Kalshi has grown rapidly by offering such contracts to retail users across the United States.
New York joins a widening group of states challenging Kalshi and similar platforms in a jurisdictional dispute with President Donald Trump’s administration over who regulates the fast-growing sector. Kalshi maintains it is federally licensed by the Commodity Futures Trading Commission and that individual states lack authority to govern its exchange.
The company pushed back sharply against the filing. “States can’t just shut down a federally licensed exchange. This would also hurt New Yorkers, who would be driven offshore,” said Elisabeth Diana, a spokesperson for the New York-based firm, who characterized the lawsuit as political theater.
The legal action follows a federal judge’s decision earlier this month to deny Kalshi’s bid to intervene against the state’s Gaming Commission. In recent weeks, the company had also been in negotiations with New York officials over tax and consumer protection matters before talks gave way to litigation.
Kalshi has been at the center of regulatory attention as prediction markets expand. The platform previously secured a legal pathway to offer election-related contracts after the CFTC dropped an appeal, a development that helped fuel its national growth and drew fresh scrutiny to the sector.
New York’s case echoes the state’s broader willingness to pursue emerging financial platforms, having previously taken action against cryptocurrency firms over alleged consumer harm. The James office has positioned itself as an aggressive regulator of digital marketplaces operating in a legal gray zone.
The dispute is likely to intensify the underlying tension between federal and state oversight of prediction markets. With multiple states pursuing parallel actions and Kalshi vowing to defend its federal license, the outcome could shape how the industry operates nationwide in the years ahead.