New York Sues Kalshi in State Court, Seeks to Shut Down Alleged Illegal Gambling Operation
The state wants to stop the prediction market platform from operating within its borders, recover allegedly illegal gains and obtain restitution for consumers.
New York Attorney General Letitia James has filed suit against Kalshi, claiming the prediction market operator is running an illegal, unlicensed gambling business in the state. The lawsuit seeks a court order barring Kalshi from continuing to operate in the state, along with restitution, disgorgement of profits and financial penalties.
The legal action in state court follows recent court rulings that rejected Kalshi’s attempts to block state enforcement while its federal lawsuit challenging New York’s 2025 cease-and-desist order continues.
Governor Kathy Hochul said in statement that Kalshi is circumventing state law.
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,” Hochul said. “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.”
Attorney General James argues that prediction markets are gambling platforms subject to New York law.
New York’s gambling laws protect children from underage betting and help combat gambling addiction,” James said. “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.”
“It’s sad to see this type of political theater from the leadership in our own state,” Elisabeth Diana, Kalshi Head of Communications, said in a statement provided to Gambling Insider. “States can’t just shut down a federally licensed exchange. This would also hurt New Yorkers, who would be driven offshore. We love New York, we love New Yorkers, and New Yorkers love our product.”
New York Seeks Injunction, Restitution and Financial Penalties
The lawsuit was brought under Executive Law § 63(12). It alleges that Kalshi’s prediction markets meet New York’s legal definition of gambling because users stake something of value on the outcomes of uncertain events outside their control or a game of chance.
New York argues that Kalshi has been operating without the required license to offer sports wagering and, in doing so, has violated multiple New York laws, including the state Constitution, Penal Law, and the Racing, Pari-Mutuel Wagering, and Breeding Law.
The complaint also alleges that Kalshi allows users aged 18 to 20 to trade on its platform. New York law requires customers to be at least 21 years old to place legal mobile sports wagers.
The complaint points out that the New York State Gaming Commission issued Kalshi a cease-and-desist letter in October 2025. Instead of complying, the operator sued the state.
New York is asking the court to issue a temporary restraining order and permanent injunction preventing Kalshi from operating in the state.
It is also seeking an accounting of customer wagers, restitution to affected users, disgorgement of profits, damages, penalties equal to three times the company’s alleged gains and statutory fines of $100,000 for each unauthorized sports wagering offer.
The Commercial Division filing values the action at $36 billion before punitive damages, costs and attorneys’ fees.
Filing Follows July Court Rulings
The lawsuit follows a series of July rulings in Kalshi’s ongoing federal lawsuit against New York.
On July 7, U.S. District Judge Analisa Torres denied Kalshi’s request for a preliminary injunction. The injunction sought to block New York from enforcing its gambling laws while the case proceeds. Judge Torres later also denied Kalshi’s request for an emergency injunction.
On July 29, a judge on the U.S. Court of Appeals for the Second Circuit denied the company’s request for an injunction pending appeal. The following day, the CFTC separately asked a federal court to issue a temporary restraining order preventing New York from pursuing enforcement while the agency’s own lawsuit against the state remains pending.
Hours after New York filed the lawsuit, Kalshi removed the case to federal court. The operator argues the claims raise federal questions under the Commodity Exchange Act and are subject to federal jurisdiction, with the CFTC not named as a necessary party.
Notably, similar attempts to remove state lawsuits to federal courts have been unsuccessful so far. Federal courts in Massachusetts, Nevada, Michigan and Washington have all remanded the cases back to the state court.
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