New York Attorney General Letitia James filed a lawsuit on Friday against prediction market platform Kalshi, accusing the federally regulated exchange of operating an illegal gambling business in the state. The lawsuit, filed in Manhattan state court, seeks to block Kalshi from continuing to offer its contracts in New York, alleging repeated violations of state gaming laws.
The state’s complaint argues that Kalshi allows users to wager on events ranging from elections to weather forecasts without a state permit, classifying its operations as an unlicensed gambling platform. The lawsuit requests a court order to halt Kalshi’s activities in New York, along with civil penalties, forfeiture of profits, and restitution for users. It also seeks fines totaling three times the company’s gains from its operations in the state and a $100,000 penalty for each attempt to offer sports wagering.
Governor Kathy Hochul and Attorney General James, both Democrats, announced the legal action in a joint statement, asserting that Kalshi’s operations violate New York’s gambling laws designed to protect consumers, prevent addiction, and fund public services. “No matter what they call themselves, prediction markets like Kalshi are gambling platforms, plain and simple,” James said in a press release. Hochul added, “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.”
Kalshi, headquartered in New York City, disputed the allegations, calling the lawsuit politically motivated. A company spokesperson 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. This would also just hurt New Yorkers, who would be driven offshore.” The company has previously argued that courts have recognized its status as a federally regulated exchange.
The lawsuit also claims Kalshi allows users younger than the state’s legal gambling age of 21 to participate, exposing residents to financial and personal risks. New York’s gambling laws prohibit underage betting and aim to combat addiction, according to the attorney general’s office.
The legal action comes amid a surge in the popularity of prediction markets. The combined monthly global trading volume on Kalshi, Polymarket, and similar platforms rose 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 during the same period.
Kalshi has not commented on the specific allegations beyond its public statement. The lawsuit marks the latest in a series of legal challenges against prediction market platforms by state authorities, raising questions about the division of regulatory authority between federal and state governments.