Ohio regulators captured industry attention in April when they announced plans to fine Kalshi $5 million for “conducting sports gaming without a license.” On Friday, New York Attorney General Letitia James made that planned fine look like a rounding error.
James sued Kalshi on behalf of the State of New York, seeking a total of $36 billion in response to the operator running an “illegal, unlicensed gambling operation.”
“What (Kalshi) offers through its Platform is quintessentially gambling: it allows a bettor to stake or risk money upon the outcome of a contest of chance or a future contingent event not under the bettor’s control or influence, upon an agreement or understanding that he will receive something of value in the event of a certain outcome,” the suit reads in part.
“The outcome of (Kalshi’s) contracts depends to a material degree upon an element of chance, which in fact predominates over any skill of the bettor, notwithstanding that the skill of the bettor may also be a factor.”
The suit arrived on the first possible day after the U.S. District Court for the Southern District of New York denied Kalshi’s request for an injunction pending appeal of its July 7 loss in a case seeking to block the New York State Gaming Commission (NYSGC) from enforcing a cease-and-desist order originally sent in October 2025.
“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. 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.”
Why did New York sue Kalshi?
James highlights in a press release that in addition to flouting state gaming law by offering sports betting without a license, Kalshi’s availability to people 18-20 years old violates New York statute as well.
“Exposing young people to online gambling can have damaging effects on their mental and financial well-being. Recent research has shown that gambling among young people is associated with psychological distress, financial difficulties, and increased risk of gambling-related harms in adulthood,” the release reads partially.
A state investigation found that Kalshi, which is headquartered in New York, “persistently advertised sports betting on its platform since at least January 23, 2025.” Notably, that predated the Super Bowl by two weeks and happened three days after Donald Trump began his second term of U.S. President, in which he reversed the course of federal regulatory action against prediction markets.
A taxing problem for Hochul, New York
By virtue of operating outside New York’s laws, Kalshi is not paying state taxes as its valuation grew recently to a reported $22bn. The suit highlights that regulated sports betting operators paid $1bn to the state in 2024 alone.
“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,” New York Gov. Kathy Hochul said in a statement. “This choice has consequences, and working closely with Attorney General James, New York is taking action to stop this illegal behavior and bring Kalshi into compliance, because no company is above the law.”
A Kalshi spokesperson responded to the lawsuit, saying in a statement to CNBC: “States can’t just shut down a federally licensed exchange … We love New York, we love New Yorkers, and New Yorkers love our product.”
The operator moved to remand the case to federal court Friday, which New York likely will challenge.
How NY arrived here in Kalshi court battles
The NYSGC first sought to shut down Kalshi in New York back in October 2025. The commission sent a cease-and-desist order to the prediction market operator on Oct. 24, but the company swiftly responded Oct. 27 with a lawsuit seeking to prevent the NYSGC from enforcing that order.
A day later, the regulator agreed to wait until the court ruled on Kalshi’s request before further moving against the operator.
New York, however, showed no such restraint after receiving favorable news on both Kalshi’s request for injunction and the company’s plea to the Second Circuit Circuit Court of Appeals. In literally the first minute it could following the July 29 denial, the attorney general’s office filed its $36bn ask in state court.
To reach that figure, the NY suit seeks:
- “Restitution, disgorgement and damages” related to customer losses and Kalshi’s gains
- Penalty of three times the company’s profits
- Fines of $100,000 “for each offering or attempt to offer sports wagering or mobile sports wagering in New York without authorization”
