New York alleges Kalshi is running an ‘illegal gambling operation’ in new lawsuit
New York has sued prediction-market platform Kalshi, alleging that it is operating an illegal gambling business by allowing users to bet on uncertain events without a state gambling licence. The case matters because it intensifies a growing conflict between state gambling regulators and the federal regulator overseeing prediction markets, potentially affecting how such platforms operate across the US.
Attorney General Letitia James says Kalshi failed to pay applicable taxes, made its service available to people under 21, and violated laws intended to limit underage betting and gambling addiction. New York is seeking forfeiture of alleged illegal profits, consumer restitution and fines worth three times Kalshi’s gains; however, a New Jersey effort to ban Kalshi was overturned by an appeals court in April 2026, while CFTC chairman Mike Selig has criticised New York’s action and defended federal jurisdiction.
- New York says Kalshi operates illegal, unlicensed gambling.
- The state seeks restitution, forfeiture and triple-profit fines.
- Federal regulators dispute states’ authority over prediction markets.
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Prediction markets let people buy and sell contracts tied to the outcome of future events, such as elections or sporting contests. Kalshi is one such platform, overseen federally by the Commodity Futures Trading Commission (CFTC), while states also regulate gambling within their borders.
The dispute centres on whether Kalshi’s event contracts fall under federal oversight or count as gambling that requires a state licence. New York Attorney General Letitia James is a key figure in the case, while CFTC chairman Mike Selig has defended the federal regulator’s role.
The outcome could help define how authority is divided between federal and state regulators, and what rules prediction-market platforms must follow. A separate challenge to Kalshi in New Jersey was overturned by an appeals court in April 2026, showing that the legal questions are being tested in more than one state.
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The case for
New York argues that Kalshi operates as a gambling platform, allowing users to wager on uncertain events without proper state licensing, which is required to protect consumers and collect taxes. The state asserts that Kalshi has violated specific protections—making its service available to minors under 21 and failing to implement safeguards against gambling addiction—demonstrating that federal oversight has been insufficient. These are legitimate concerns about consumer protection and tax compliance that states traditionally regulate.
The case against
Kalshi and the federal regulator contend that prediction markets are financial derivatives properly overseen by the CFTC, not gambling operations governed by state gaming law. The precedent of an appeals court overturning New Jersey's attempted ban indicates that federal jurisdiction over commodity futures takes constitutional precedence, and states cannot unilaterally regulate instruments within the federal framework. Allowing states to separately regulate the same financial instruments would create chaos and hinder legitimate innovation under unified national oversight.