KalshiEX, LLC was sued by New York on Thursday. The state asked a Manhattan court to shut down the prediction-market operator, order it to pay back all its New York profits, and impose a penalty equal to three times those profits.

New York says Kalshi’s contracts are bets in everything but name

The announcement came from Governor Kathy Hochul and Attorney General Letitia James. The state’s case, brought in a verified petition filed in the New York Supreme Court under Executive Law 63(12), is that a Kalshi customer risks money on an unpredictable outcome over which they have no control and is paid if it comes to pass.

That’s the legal definition of gambling, the Attorney General’s Office says.

“No matter what they call themselves, prediction markets like Kalshi are gambling platforms, plain and simple,” James said in the announcement.

The petition claims that by not getting a license from the New York State Gaming Commission, Kalshi avoided the ~51% tax that licensed mobile sportsbooks pay.

That money funds schools and problem-gambling programs. The filing also cites Kalshi’s own numbers, a claimed $22 billion valuation, and $178 billion in annualized transaction volume.

The Attorney General’s staff seem to have used the platform as proof. The investigators wagered from New York accounts. They bought four “yes” contracts on a UConn-Michigan basketball game for $1.14 in April and 10 more on the winner of Big Brother in July.

The state also said Kalshi took bets on New York college teams, citing a Siena-Duke matchup that is off-limits even to licensed sportsbooks. It says Kalshi let people between the ages of 18 and 20 trade even though the state requires people to be at least 21 to bet on sports.

The Attorney General’s Office said that exposing that age group to online gambling involves long-term psychological and financial risk.

The petition also seeks $100,000 for each unauthorized sports-wagering offer under the Racing Law, as well as the disgorgement and triple-damages demand under Penal Law 80.10. The court has not tested any of those claims, and it has not found Kalshi liable.

New York aims a federal statute at a federally regulated exchange

In addition to the state gambling charges, New York says Kalshi has violated the federal Interstate Wire Act, which bars the use of wires to transmit bets across state lines.

Since 2020, Kalshi has claimed that its event contracts are federally regulated derivatives, not wagers, because it is a designated contract market registered with the Commodity Futures Trading Commission, and therefore not subject to state gambling law.

By reaching for a federal criminal statute, New York is fighting on Kalshi’s turf. The CFTC claims exclusive authority over these markets and has sued New York and several other states to assert it.

On July 29, a Second Circuit judge denied the company’s request for emergency relief and referred its motion for an injunction to a three-judge panel. That left Kalshi vulnerable after a penalty pause New York had granted in October 2025 had expired.

That dispute dates back to October, when Kalshi sued New York officials to stop the Gaming Commission’s cease-and-desist order. Analisa Torres, a U.S. District Judge, denied Kalshi’s injunction on July 7, ruling that the federal Commodity Exchange Act does not preempt New York’s gambling laws with respect to Kalshi’s sports-event contracts, Cryptopolitan reported.

Torres wrote that the state’s interests in curbing gambling addiction and protecting sports integrity “heavily” outweighed the company’s federal-preemption case, and added that courts across the country remain split on the question. Kalshi is appealing that ruling.

James in April sued Coinbase Financial Markets and Gemini Titan on the same theory, saying their event-contract products are unlicensed gambling. Coinbase moved its case to federal court within a day, making the same federal-question argument that Kalshi is making.

In April, Hochul signed an executive order prohibiting state employees from insider trading through prediction markets such as Kalshi. The company had not publicly responded to the July 31 filing as of the time of writing.

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