New York Sues Kalshi Over Alleged Illegal Sports Betting Operations

New York has filed a lawsuit against prediction market platform Kalshi, accusing the company of operating an unlicensed gambling business by offering sports and event-based wagering to residents without a state gaming license.

The petition, filed Friday in the New York Supreme Court, seeks to block Kalshi from continuing its operations in the state. Authorities are also requesting a full accounting of customer wagers, betting losses, company profits, restitution, damages, and civil penalties.

According to a statement from Governor Kathy Hochul and Attorney General Letitia James, New York is seeking financial penalties equal to three times Kalshi’s alleged gains from the activity, along with fines of $100,000 for each unauthorized or attempted offer of sports or mobile sports wagering.

James argued that New York’s gambling laws are designed to protect minors and address gambling addiction, stating that prediction market platforms such as Kalshi function as gambling operators regardless of how they describe their services.

Kalshi, which reportedly sought a $40 billion valuation during a June fundraising round, has faced increasing legal scrutiny across the United States. The company recently secured a temporary legal victory in Minnesota, where a federal court ruled that the state's ban on prediction markets likely conflicts with the Commodity Exchange Act. The court granted a preliminary injunction benefiting both Kalshi and rival platform Polymarket, along with the Commodity Futures Trading Commission.

Responding to the lawsuit, Kalshi Head of Communications Elisabeth Diana criticized New York’s action, arguing that states cannot shut down a federally regulated exchange. She added that restricting Kalshi’s operations would likely push New York users toward offshore platforms.

The lawsuit alleges that Kalshi offers contracts tied to professional and college sports, elections, and cultural events. State officials claim the platform permits users between 18 and 20 years old to participate and includes markets involving New York college teams, activities prohibited for licensed sportsbooks under state law.

The legal action follows an October cease-and-desist order issued by the New York State Gaming Commission. Kalshi previously failed to block state regulators after a federal judge denied its request for an injunction on July 7 and rejected a renewed appeal on July 27.

Kalshi has also experienced rapid user growth, with CNBC reporting the platform added roughly 3 million users during the World Cup, more than doubling its reported user base since May.