New York Governor Kathy Hochul and Attorney General Letitia James have sued prediction market Kalshi for operating an unlicensed gambling business, seeking $36 billion in penalties. The state alleges Kalshi offers illegal sports betting and allows underage users. The lawsuit intensifies a jurisdictional battle, as the federal CFTC claims exclusive oversight over prediction markets and has sued New York to halt its enforcement, while Kalshi dismisses the state's legal action as political theater.
New York lawsuit against Kalshi
- ▪New York Governor Kathy Hochul and Attorney General Letitia James filed a lawsuit on July 31, 2026, against KalshiEX, LLC, alleging it operates an unlicensed gambling business.
- ▪The New York Attorney General is seeking $36 billion in penalties, including a $100,000 fine for each illegal sports betting offering, the forfeiture of all illegal gains, and restitution to users.
- ▪The lawsuit alleges Kalshi allows users aged 18 to 20 to place bets, violating New York's minimum age requirement of 21 for mobile sports betting.
Federal vs. state jurisdiction dispute
- ▪The Commodity Futures Trading Commission has sued New York and filed an emergency motion to block the state from enforcing gambling laws against prediction markets.
- ▪States argue that the majority of prediction market transactions are sports betting, which falls under state regulatory authority rather than federal commodities jurisdiction.
- ▪Kalshi argues that states lack the authority to regulate its platform because it is a federally licensed exchange overseen by the Commodity Futures Trading Commission.
Prediction market regulation precedents
- ▪At least four states, including Massachusetts, Michigan, Nevada, and Washington, have successfully obtained court orders restricting Kalshi's activities.
- ▪Arizona's Attorney General filed criminal charges against Kalshi in April 2026, alleging the company illegally allowed users to bet on elections.
- ▪A federal judge in Minnesota temporarily blocked a state law banning prediction markets, ruling that federal law preempts statewide bans.
- ▪The 3rd Circuit Court of Appeals granted Kalshi an injunction preventing New Jersey regulators from enforcing a ban on collegiate sports wagers.
New York gambling law enforcement
- ▪Attorney General Letitia James filed similar lawsuits in April 2026 against Coinbase Financial Markets and Gemini Titan for running unlicensed gambling platforms.
- ▪Governor Kathy Hochul signed an executive order in April 2026 prohibiting New York state employees from engaging in insider trading on prediction markets.
- ▪The New York State Gaming Commission issued a cease-and-desist letter to Kalshi in October 2025, demanding it stop operating an unlicensed mobile sports wagering platform.
Tax revenue motivation
- ▪New York officials state that regulated gambling tax revenues are legally designated to fund public schools, youth sports programs, and gambling addiction treatment.
- ▪The lawsuit alleges Kalshi sidestepped state taxes required of licensed casinos and mobile sports betting platforms by operating without a license.
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