New York’s Sweeping Crackdown on Kalshi
New York Governor Kathy Hochul and Attorney General Letitia James today announced that New York has sued KalshiEX, LLC (Kalshi) for running an illegal gambling operation in New York through its prediction market platform. Prediction markets have rapidly broken into the mainstream in the United States, positioning themselves as an alternative to both traditional polling and licensed sports betting.
The Core Allegations: Illegal Gambling vs. Event Contracts
An investigation by the Office of the Attorney General (OAG) found that Kalshi’s prediction market is an illegal, unlicensed gambling operation. New York-based Kalshi calls itself a federally regulated ‘event contracts’ exchange rather than a traditional sportsbook, a distinction that has fuelled ongoing legal battles with state regulators.
No matter what they call themselves, prediction markets like Kalshi are gambling platforms, plain and simple. James argues that Kalshi’s contracts meet the state’s definition of gambling because users risk money on uncertain events they can’t control.
Speaking to Reuters, a Kalshi spokesperson called the lawsuit ‘political theater,’ adding that states ‘can’t just shut down a federally licensed exchange’.
Protecting Consumers and Underage Bettors
Kalshi’s illegal prediction market exposes New Yorkers – including those under the legal gambling age of 21 – to serious personal and financial risk. Its platform is also available to people aged 18 to 20, while New York requires mobile sports bettors to be at least 21.
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, Governor Hochul said. By ignoring our laws, Kalshi is running an illegal operation and harming New Yorkers in the process.
The Jurisdictional Clash: State Authority vs. Federal Preemption
Kalshi had separately tried to block New York’s gambling laws, but a federal judge rejected its request in July. U.S. District Judge Analisa Torres ruled late Tuesday that Kalshi failed to show likelihood of success on the merits as it relates to the issue of preemption under the Commodity Exchange Act, denying the prediction market’s motion for a preliminary injunction that would have blocked any regulatory effort by the state.
Gamble with our laws and you’re going to lose. Just ask Kalshi, Democrat New York Governor Kathy Hochul wrote on social media Wednesday morning.
The Penalties and Future of Prediction Markets
The lawsuit is seeking a court order stopping Kalshi from operating as an unlicensed gambling business and requiring the company to pay fines, forfeit all illegal gains, and pay restitution to users. The state is separately seeking $100,000 for each unauthorized offer or attempted offer of sports wagering.
Less than an hour before New York filed its case, the Commodity Futures Trading Commission submitted an emergency motion asking a federal court to block the state’s enforcement action. The CFTC also sued New York in April, arguing that federal law gives it exclusive authority over event contracts offered by registered exchanges.
Sources Quoted:
The Straits Times, the Office of the New York Attorney General (Letitia James, Gov. Kathy Hochul), the Bitcoin Foundation, and Courthouse News.
Leo Falsafi is a digital marketing veteran and senior journalist at Virlan.co, where he covers the intersection of digital marketing, gaming, and breaking US trending news. With nearly two decades of hands-on experience in SEO and digital strategy, Leo has consulted for and scaled hundreds of companies. His deep industry roots allow him to deliver sharp, fact-checked insights and analysis on the trends shaping today's digital landscape.