Key highlights:
- New York Attorney General Letitia James filed a lawsuit against prediction market platform Kalshi
- The AG alleges that the platform has been operating as an unlicensed gambling firm
- The CFTC argues that Kalshi is a federally governed platform and falls under the agency’s oversight
Kalshi has faced another legal challenge as New York Attorney General Letitia James has filed a fresh lawsuit against the prediction market platform. The AG accused the company of running an unlicensed gambling operation in the state. As in many other US states, New York also claims that the platform has violated the government’s gambling laws, putting consumers at risk.
Notably, the New York lawsuit represents the latest legal issue facing prediction markets in the US. While many state authorities have already sued prediction market platforms like Kalshi and Polymarket, the firms claim that they are under federal oversight.
Why is New York suing Kalshi?
A Reuters report dated revealed that the prediction market giant Kalshi is facing a fresh lawsuit from New York Attorney General Letitia James. The attorney general alleged that the platform has been operating without obtaining the required license from the state’s gaming commission.
The lawsuit states that Kalshi has been allowing traders to bet on event contracts tied to sports, elections, and other real-world events. New York considers this a form of gambling, which allegedly requires the platform to comply with the state laws. For the attorney, these contracts act like traditional bets and therefore fall under New York’s gambling laws. The attorney added,
“New York’s gambling laws protect children from underage betting and help combat gambling addiction. No matter what they call themselves, prediction markets like Kalshi are gambling platforms, plain and simple.”
The AG further claimed that the term “prediction market” does not change their definition under the state laws. This indicates that each service or trade is understood by the task it performs rather than its official definition. The AG added that as the prediction market platforms function like a traditional betting platform, they are required to be registered under the state gambling laws.
This isn’t the first time Attorney General James filed a lawsuit against prediction market platforms. Previously, in April 2026, James filed similar cases against Coinbase Financial Markets and Gemini Titan. She alleged that these platforms’ event contracts were also illegal gambling products.
Several other US states have also reportedly taken action against prediction market platforms. Recently, a federal judge blocked Minnesota’s ban on prediction markets, as reported by CoinCodex. However, Washington state has been successful in blocking Kalshi’s sports event contracts. The increased scrutiny comes amidst rising prediction market trading volumes. For example, a recent Chainalysis report found that the 2026 World Cup generated over $20 billion in on-chain prediction market trading volumes.
CFTC and New York clash over prediction market regulation
The rapid growth of prediction market platforms like Kalshi, especially following the US President Donald Trump’s win in the 2024 elections, has raised eyebrows on its regulation. While the state regulators believe that prediction platforms should come under their gambling laws, the US CFTC argues that the federally regulated platforms fall under its oversight.
New York Governor Kathy Hochul noted in a recent 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. This choice has consequences.”
New York’s latest decision has sparked criticism from Kalshi. The platform stated:
“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.”
Just before New York filed its lawsuit, the CFTC had submitted an emergency motion. The regulator has asked the court to stop the state’s enforcement actions. The agency believes that the intervention of state regulators into the federally regulated prediction market undermines its authority and disrupts the broader industry.
Source:: New York Alleges Kalshi Is an "Illegal Gambling Operation" in Lawsuit