Kalshi Hit With Lawsuit as New York Accuses Platform of Operating a Gambling Service

New York has launched a legal challenge against Kalshi, seeking to stop the prediction-market platform from operating what the state claims is an unlicensed gambling business while also pursuing monetary penalties.

The lawsuit alleges that Kalshi is offering sports and event-based wagering products to customers in New York without the proper authorization from state gaming regulators.

Filed Friday in the New York Supreme Court, the complaint asks a judge to prevent Kalshi from continuing its operations, which officials characterize as illegal gambling activity. The state is also seeking records of customer wagers, losses, and company profits, along with restitution, damages, and civil fines.

A statement from Governor Kathy Hochul and Attorney General Letitia James said New York is seeking damages equal to three times Kalshi’s revenue from the disputed activities, in addition to a $100,000 penalty for each unauthorized or attempted sports betting or mobile wagering offering.

James said New York’s gambling laws are intended to protect consumers, prevent underage betting, and reduce gambling-related harm. She argued that prediction-market platforms such as Kalshi are gambling services regardless of how they present or describe their products.

Kalshi, which targeted a $40 billion valuation during a June funding round, is facing increased scrutiny as prediction markets encounter regulatory challenges across the country. The company and rival Polymarket recently secured a temporary victory in Minnesota after a federal court found that the state’s restrictions on prediction markets could potentially conflict with the Commodity Exchange Act. The court issued a preliminary injunction preventing enforcement of the law against the companies and the Commodity Futures Trading Commission.

Kalshi’s communications executive Elisabeth Diana criticized New York’s move, calling it political interference. She argued that states cannot shut down a federally regulated exchange and warned that limiting access to domestic platforms could drive users toward offshore services. She added that Kalshi remains supportive of its New York user base.

New York officials said Kalshi’s event contracts effectively operate as wagers, claiming the platform offers markets tied to professional sports, college sports, elections, and cultural events. The lawsuit alleges that Kalshi allows users aged 18 to 20 to participate and provides markets involving New York college teams, both of which are restricted under state rules for licensed sportsbooks.

Kalshi experienced rapid user growth during the World Cup, adding 3 million users during the tournament, according to CNBC. That increase more than doubled the company’s previously reported user base of 2 million at the start of May.

The attorney general’s office said the lawsuit follows an October cease-and-desist order issued by the New York State Gaming Commission.

Kalshi previously attempted to prevent state regulators from taking action, but a federal judge rejected its request on July 7 and later declined to issue an injunction while the company’s appeal moved forward on July 27.