New York sued Kalshi Inc.'s trading subsidiary for allegedly running an illegal, unlicensed gambling operation in the state, marking another legal hurdle for an industry that has won support from the Trump administration.
The suit, filed Friday in state court in Manhattan, alleges that Kalshi's prediction market exposes state residents – including those under the legal gambling age of 21 – to "serious personal and financial risk," New York Attorney General Letitia James said in a statement.
The company is accused in the lawsuit of failing to seek a license from the New York State Gaming Commission and avoiding paying taxes "like licensed casinos and mobile sports gambling platforms do."
"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," New York Governor Kathy Hochul said in the statement.
It is the latest legal clash for Kalshi, where users can bet on events ranging from sports and pop culture to geopolitics. The industry has been embraced by President Donald Trump's Commodity Futures Trading Commission, which says it has exclusive jurisdiction over the platforms.
Kalshi called the New York lawsuit "sad" political theater.
"States can't just shut down a federally licensed exchange," Kalshi spokeswoman Elisabeth Diana said in a statement. "This would also hurt New Yorkers, who would be driven offshore."
The suit comes after a New York judge ruled earlier this month that Kalshi can't stop state gaming officials from overseeing its sports prediction markets.
A day before the suit was filed, however, the CFTC asked a federal court in Manhattan for an order temporarily stopping New York from taking action against the industry.
The CFTC filing cited what it described as New York's "increasingly aggressive attempts to assert jurisdiction over federally regulated interstate commodity derivatives markets, thereby unconstitutionally intruding on the exclusive regulatory jurisdiction granted to the CFTC under the Commodity Exchange Act."
Neither the CFTC nor the New York attorney general's office immediately responded to messages seeking comment on the federal government's filing.
In its lawsuit, New York alleges that Kalshi's prediction markets "meet the legal definition of gambling because the outcomes of the events on which its users are betting are uncertain and outside the control of the bettor or hinge on a game of chance," according to James' statement.
Earlier this month, a federal judge temporarily halted enforcement of Minnesota's first-in-the-nation law barring prediction markets, finding that some of the contracts could be considered financial instruments under the exclusive jurisdiction of a federal agency. The injunction had been sought by the CFTC, Kalshi, and Polymarket.
