New York has taken Kalshi to court, exacerbating the widening dispute over prediction markets in yet another state.
Attorney General Letitia James filed the lawsuit in Manhattan, accusing Kalshi of running an unlicensed gambling business. The state wants the company blocked from offering event contracts unless it follows New York gaming law.
A similar lawsuit against Coinbase and Gemini emerged in April.
The complaint also seeks customer restitution, forfeiture and civil penalties worth three times Kalshi’s alleged profits.
At the center of the case is whether Kalshi’s contracts are federally regulated derivatives or wagers dressed up as financial products. New York says customers are plainly betting money on uncertain events, which would make prediction markets subject to the state’s gambling laws.
New York Attorney General Letitia James said: “No matter what they call themselves, prediction markets like Kalshi are gambling platforms, plain and simple.
“By ignoring our laws, Kalshi is running an illegal operation and harming New Yorkers in the process. We are taking them to court to uphold our laws and protect New Yorkers.”
State officials also targeted Kalshi’s age policy. The exchange allows customers between 18 and 20 to trade, while New York requires mobile sports betting users to be at least 21.
Kalshi dismissed the lawsuit as “political theater” in a media statement. It argues that New York cannot shut down an exchange licensed at the federal level.
The company says its contracts fall under the exclusive authority of the Commodity Futures Trading Commission (CFTC), not state gambling regulators.
That argument rests on Kalshi’s registration as a designated contract market with the agency. Kalshi says the Commodity Exchange Act gives the CFTC exclusive authority over trading on those exchanges.
Gaming attorney and analyst Daniel Wallach posted an update on the case, explaining that Kalshi has transferred the New York Attorney General’s civil enforcement case to federal court, triggering a venue dispute. While this jurisdictional manoeuvring briefly delays state enforcement, James is expected to secure a swift remand back to state court.
A bill to regulate prediction markets in New York was filed in January, but hasn’t moved since.
Kalshi faces a mixed record in state court battles
The lawsuit arrives after Kalshi lost an important preliminary round in federal court. A US District Court judge declined to block New York enforcement on July 8. A federal appeals court then rejected Kalshi’s related emergency request Wednesday.
Kalshi took New York to court in October 2025, shortly after the state Gaming Commission ordered it to stop operating. The CFTC filed a separate lawsuit in April, contending that federal commodities law overrides New York’s gambling rules.
The commission returned to court Friday with an emergency motion seeking to stop New York’s enforcement. It described the state’s action as regulatory overreach.
Courts elsewhere have produced conflicting answers. Massachusetts secured a preliminary injunction in January that blocked Kalshi’s sports contracts without a state license.
Michigan won a temporary restraining order in June after a federal judge returned its case to state court. Washington secured a preliminary injunction in July, with a final order due August 5.
Nevada has also obtained orders restricting Kalshi’s sports, election and entertainment markets during litigation. Those rulings strengthened the states’ position, though none settled the national dispute.
New Jersey produced the largest appellate victory for Kalshi. In April, the Third Circuit upheld an injunction preventing state officials from enforcing gambling laws against its sports contracts.
Minnesota produced a more decisive early win for Kalshi. The state enacted the country’s first law explicitly banning prediction markets, with violations carrying criminal penalties.
Kalshi, Polymarket and the CFTC challenged the measure before its August 1 effective date. A federal judge blocked enforcement on July 27, finding that federal law likely gives the CFTC exclusive authority over the contracts.
The injunction allows both platforms to remain available while the case continues, but the divided ruling is just preliminary and could still be overturned.