New York Calls Kalshi ‘Illegal Gambling Operation’ in $36B Suit

New York has filed a lawsuit against prediction-market platform Kalshi, seeking at least $36 billion in damages, labeling the platform as an "illegal gambling operation." The case, filed by Governor Kathy Hochul and Attorney General Letitia James, accuses Kalshi of violating both the New York State Constitution and the Federal Interstate Wire Act, which prohibits the transmission of information aiding bet placement on sporting events or contests.

The suit seeks compensatory damages, including returning customers' funds, fines for each illegal bet offered, and more. Kalshi, based in New York City, has swiftly removed the case to federal court, where it believes the venue may be more favorable. The CFTC, the federal regulator overseeing prediction markets, has also acted swiftly, seeking an emergency ruling to halt the AG from pursuing enforcement actions against Kalshi or other CFTC-registered platforms.

Kalshi's spokesperson criticized the legal proceedings, stating that states cannot simply shut down federally licensed exchanges and that it would harm New Yorkers by driving them offshore. This legal battle follows a favorable ruling in a separate case where Kalshi had sued New York last October. The issue of sports-event contracts, which Kalshi introduced in January 2025, is being litigated across multiple states as regulators, consumers, and Native American tribes challenge the platforms' operations.

The CFTC has even sued nine states, including New York, over such efforts. Experts anticipate this issue might eventually reach the U.S. Supreme Court, although that remains unlikely until at least the following year.