The state is seeking up to $36 billion in penalties, disgorgement, and restitution from the prediction market platform
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New York Attorney General Letitia James and Governor Kathy Hochul filed suit against prediction market platform KalshiEX, LLC on Friday, alleging the company has been operating an unlicensed gambling business in the state. The lawsuit, filed in Manhattan state court, is seeking a permanent injunction against Kalshi's operations, along with fines, restitution to users, and forfeiture of all profits.
The state contends that Kalshi never obtained a gambling license from the New York State Gaming Commission or remitted the taxes that other licensed operators, including casinos and mobile sports betting platforms, are obligated to pay. On top of demanding forfeiture of profits, the state wants the court to award treble damages on all gambling proceeds and a $100,000 penalty for every customer solicitation — figures the attorney general's office calculates add up to $36 billion, according to The Wall Street Journal.
"No matter what they call themselves, prediction markets like Kalshi are gambling platforms, plain and simple," Attorney General James said in a statement. "By ignoring our laws, Kalshi is running an illegal operation and harming New Yorkers in the process."
The suit further charges that Kalshi allows users as young as 18 to trade on its platform, even though New York requires participants in mobile sports betting to be at least 21. The state said that exposing younger users to online gambling raises risks of psychological distress and financial harm.
Kalshi called the suit "political theater." "States can't just shut down a federally licensed exchange," a company spokesperson said. "We love New York, we love New Yorkers, and New Yorkers love our product."
Hours before the lawsuit was announced, the Commodity Futures Trading Commission — which asserts exclusive federal authority over prediction markets — moved in court to block New York from taking any enforcement action against Kalshi, according to CNBC. CFTC Chairman Michael Selig wrote on X $TWTR that the agency "will continue to defend its jurisdiction" against what he called an attempt to force a sudden shutdown of prediction markets nationwide.
The Journal reported that Kalshi had been in talks with state officials for weeks before the filing, putting forward proposals on consumer safeguards and a revenue-sharing arrangement patterned after an agreement the company reached in North Carolina. Those talks broke down before the filing.
The suit follows a series of state-level legal battles over prediction markets. New York's gaming commission had previously issued a cease-and-desist letter to Kalshi in October 2025 over its sports betting markets, and earlier this month a Southern District judge threw out the company's bid to block that order from taking effect, according to CNBC. Courts in Nevada, Michigan, and Wisconsin have issued conflicting rulings on whether states can regulate prediction market platforms, according to CNN.
In April, Attorney General James filed similar suits against Coinbase and Gemini for operating prediction market platforms without state gambling licenses.
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