New York sues Kalshi alleging illegal prediction markets defying state gambling laws

New York Attorney General Letitia James has filed a lawsuit against prediction market platform Kalshi, accusing the company of operating an illegal gambling business in violation of state laws. The legal action, brought in Manhattan's New York Supreme Court, alleges that Kalshi engages in unlicensed gambling activities on sports, culture, elections and other events. New York Attorney General Letitia James contends that Kalshi's activities pose a risk to the state's minors and those struggling with gambling addiction.

James maintains that prediction markets like Kalshi are inherently gambling operations, regardless of the terminology used to describe them. The lawsuit seeks to compel Kalshi to surrender all profits and compensate New Yorkers for their losses, as well as impose fines three times the company's gains, amounting to approximately $36 billion. The total damages New York seeks total around $36 billion.

The lawsuit claims that Kalshi operates without a valid license from New York's Gaming Commission and has failed to pay state taxes, unlike licensed casinos and mobile sports gambling platforms. In addition, the suit points out that Kalshi permits users as young as 18 to place bets, while New York law requires participants in mobile sports betting to be at least 21 years old.

State officials have dismissed Kalshi's claims that the lawsuit amounts to political theater, maintaining that the company's operations constitute textbook gambling, as the outcomes of the events on which its users are betting are uncertain and hinge on chance. Kalshi has rejected the allegations, stating that its operations are regulated by federal law, and that states lack the authority to shut down a federally licensed exchange.

The company's spokesperson, Elisabeth Diana, warned that such a shutdown would harm New Yorkers, as they would be forced towards unregulated offshore platforms. Despite facing similar legal challenges from at least 13 other states, Kalshi and rival platforms like Polymarket continue to operate.