By Rajwa Quasim
New York has filed a lawsuit against prediction market platform Kalshi seeking as much as $36 billion in penalties alleging that the company has been running an illegal, unlicensed gambling operation in the state for years.
The lawsuit, filed by New York Attorney General Letitia James in state court, alleges that Kalshi’s prediction markets amount to unlawful sports betting under New York state law, and it poses a threat such as serious personal and financial risk. It also allows people under New York’s legal gambling age of 21 to participate.
James said the platform failed to obtain a New York State Gaming Commission license to operate its platform, where people trade based on the predicted outcomes of sport, elections and other events. The lawsuit asked the court to order Kalshi to forfeit all illegal gains, pay restitution to consumers who were harmed, and pay fines equal to three times the company’s gains.
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“New York’s gambling laws protect children from underage betting and help combat gambling addiction. No matter what they call themselves, prediction markets like Kalshi are gambling platforms, plain and simple,” James said in a statement.
Kalshi’s spokesperson called the lawsuit “political theater from the leadership in our own state” and argues that their platform is federally licensed with the state having no jurisdiction over them. According to Kalshi, “through this action — which seeks to shut Kalshi down nationwide — New York seeks to fundamentally subvert the exclusive jurisdiction of the CFTC.”
New York can move ahead with its lawsuit as the federal appeals court approved the state to continue with the case by rejecting Kalshi’s request to pause an earlier court ruling that said the state’s gambling laws could apply despite federal regulation.
To counter the lawsuit, U.S. Commodity Futures Trading Commission (CFTC) maintained that it has exclusive jurisdiction over federally regulated event contracts and has sought to block state efforts to restrict the platform. The agency also filed an emergency motion in the federal court to block New York’s move.
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The states argue that they have the authority to regulate activities involving sports betting, which accounts for most of the activity on prediction markets. They further contend that such activities are distinct from commodities and futures contracts, which fall under the oversight of the CFTC.
Prediction markets such as Kalshi and Polymarket became popular since they predicted Republican Donald Trump’s victory against Democrat candidate Kamala Harris in 2024, something that the traditional polls failed to do at large.
Federal law gives the CFTC authority to regulate prediction markets, while gambling regulation is largely left to individual states.
So far, Washington, Nevada, Michigan and Massachusetts have succeeded in restricting Kalshi’s activities. Meanwhile, Minnesota’s effort to enforce a law banning prediction markets has been temporarily blocked by a federal judge.