New York sues Kalshi, claiming prediction contracts violate state gambling laws

State Attorney General Letitia James is looking to halt all of Kalshi’s contracts “relating to sports, culture, elections and other events.”MANHATTAN (CN) — New York’s attorney general’s office sued Kalshi early Friday morning, accusing the exploding prediction market of running a gambling operation without a state license.In a 32-page complaint filed in New York County Supreme Court, Attorney General Letitia James claims the platform runs afoul of state gambling regulations by offering unlicensed wagering and failing to prevent bettors under the age of 21 from signing up.“New York’s gambling laws protect children from underage betting and help combat gambling addiction,” James said in a statement announcing the lawsuit. “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.”With the new lawsuit, New York becomes the latest of several states looking to regulate the emergence of prediction markets, which critics say is no different from gambling. States including Nevada, Massachusetts and Washington have all won court orders restricting Kalshi’s activity. And earlier this month, a federal judge in New York shot down Kalshi’s bid to block state regulators from regulating it.New York Governor Kathy Hochul said in a statement Kalshi “has chosen to ignore New York’s gaming laws, which exist to protect consumers, prevent problematic gambling, deliver funding for critical public services, and ensure that every company plays by the same rules.”Kalshi and other prediction markets, like Polymarket, have attempted to distance themselves from traditional gambling by likening their platforms to stock markets and boasting about the informational value of their contracts. These sites offer more traditional betting options like sports, but also allow users to put money down on real-world events like elections and cultural issues.Past lawsuits from other states have typically targeted the sports contracts, since they serve as a direct alternative to licensed sports betting companies like DraftKings and Fanduel. But in the New York suit, James claims all of Kalshi’s offered contracts are illegal under state gaming laws.Kalshi, James says, “allows bettors in New York and elsewhere, to place bets on the outcomes of future contingent events for which the outcome is uncertain and outside the control of the bettor.”Beyond sports, James points to Kalshi’s offerings like “Which party will win the U.S. Senate?” or “Big Brother Season 28 Winner” as examples of unlawful contracts.“Each contract is a bet,” she says.James further criticized Kalshi for only requiring users to be 18, while state gaming laws require New Yorkers to be 21 to place wagers. Gambling, James says, can harm “a bettor’s financial, emotional and physical health.”She’s not just looking to restrict Kalshi’s sports contracts, she’s asking the state court to demand it cease offering “contracts relating to sports, culture, elections and other events,” since it’s doing so without a gambling license.Kalshi claims this goes beyond what the federal court allowed.“It’s sad to see this type of political theater from the leadership in our own state. States can’t just shut down a federally licensed exchange. This would also hurt New Yorkers, who would be driven offshore. We love New York, we love New Yorkers, and New Yorkers love our product,” said Elisabeth Diana, Kalshi’s head of communications, in a statement.The Trump administration has proven a thorn in the side of states looking to regulate the new industry. President Donald Trump’s son Donald Trump Jr. is a major investor in Polymarket and sits on the company’s advisory board.Under the Trump administration, the U.S. Commodity Futures Trading Commission has claimed exclusive oversight of the platforms and sued states looking to rein them in.Kalshi and Polymarket, the two largest prediction markets, have been lightning rods for controversy as they rise in popularity. Numerous insider trading-esque scandals have plagued the platforms, particularly relating to their real-life event contracts.In April, federal prosecutors in New York charged a master sergeant in the U.S. Army Special Forces with using classified information to bet on the removal of Venezuelan President Nicolás Maduro. Prosecutors say Gannon Ken Van Dyke, who was explicitly involved in the operation, placed bets on Polymarket in the days leading up to the mission, making more than $400,000.Subscribe to our free newslettersOur weekly newsletter Closing Arguments offers the latest about ongoing trials, major litigation and rulings in courthouses around the U.S. and the world, while the monthly Under the Lights dishes the legal dirt from Hollywood, sports, Big Tech and the arts.Additional Reads