New York sues Kalshi, alleging the prediction market enables illegal gambling

New York is accusing Kalshi of running an illegal gambling operation, becoming the latest state to file a lawsuit against the prediction market.

The complaint seeks to halt Kalshi's operations in New York, force it to pay restitution to consumers who made bets on the platform, forfeit its profits and pay fines equal to three times the amount it has generated through its operations in the state.

In announcing the lawsuit, the office of New York Attorney General Letitia James said Kalshi exposes state residents to financial and personal risk. The company, which is based in New York City, also allows people who are younger than the state's legal gambling age of 21 to use its services, the suit notes.

"New York's gambling laws protect children from underage betting and help combat gambling addiction," James said in a statement. "No matter what they call themselves, prediction markets like Kalshi are gambling platforms, plain and simple."

New York Governor Kathy Hochul also weighed in, accusing Kalshi in a statement of ignoring the state's gaming laws. 

According to the lawsuit, the prediction market platform is not licensed with the New York State Gaming Commission "in any capacity." The commission last fall ordered Kalshi to shut down what it called an "unlicensed mobile sports wagering platform" in the state.

Kalshi responded by suing the commission and its members in a legal action that remains pending.

Bill Miller, CEO of the American Gaming Association, a trade group that represents the U.S. casino industry, applauded New York's lawsuit against Kalshi.

"It is estimated that the 'prediction market' evasions of state and tribal law have siphoned more than $1.2 billion in gaming tax revenue from critical community initiatives across America," he said in a statement.

In April, New York filed a similar lawsuit against prediction markets and cryptocurrency platforms Coinbase and Gemini, alleging that they facilitate illegal gambling.

New York's lawsuit is "political theater," Kalshi says

The popularity of prediction markets has exploded since the 2024 U.S. presidential election. The combined monthly global trading volume on Kalshi and Polymarket has soared from less than $5 billion in September 2025 to about $24 billion as of April 2026, according to the Pew Research Center.

By comparison, Americans bet an average of $14 billion per month on legal sports betting sites, the nonpartisan research firm found.

Prediction markets say they differ from gambling operations because platform users trade against other consumers, similar to how stock markets work. Prices are based on trading, and platforms only take a fee from the trading, prediction markets say.

A Kalshi representative told CBS News that the company was recently in talks with New York officials about ways it could partner with the state.

"It's sad to see this type of political theater from the leadership in our own state," Kalshi spokeswoman Elisabeth Diana said in a statement to CBS News. "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." 

States and feds clash

The New York lawsuit highlights the broader legal battle over whether states or the federal government have the authority to regulate prediction markets, which allow users to bet on the outcome of sports, elections and other events.

A growing number of states are suing prediction markets, claiming they offer illegal sports betting and gambling services that violate state laws. 

The Commodity Futures Trading Commission, the federal agency that oversees prediction markets, argues that Congress has given it exclusive regulatory jurisdiction over the platforms. The agency has filed legal actions against at least nine states, including New York, to block them from regulating the markets.

Earlier this week, a federal judge temporarily stopped Minnesota from enforcing its recently enacted law banning most bets on prediction markets. The decision came after the CFTC filed a lawsuit seeking to halt the law from taking effect in August.