New York Sues Kalshi Over Alleged Unlicensed Gambling Operations

New York has initiated legal action against the prediction market platform Kalshi, alleging the operation of an illegal, unlicensed gambling business. The lawsuit specifically cites event contracts offered on sports, elections, and other outcomes.

The state seeks to halt Kalshi’s alleged illegal gambling activities within New York, compel the company to forfeit illicit gains, provide restitution to users, and pay civil penalties equivalent to three times those gains. The Attorney General stated that prediction markets like Kalshi function as gambling platforms, asserting the state's intention to enforce its laws and safeguard New Yorkers.

This legal action follows a cease-and-desist order issued to Kalshi by the New York State Gaming Commission in October 2025. Kalshi subsequently sued the regulator in federal court. A judge denied Kalshi’s request for a preliminary injunction in July, and an appeals court later rejected its attempt to block enforcement during the appeal process. Kalshi's head of communications expressed that the state's actions represented political theater and would negatively impact New Yorkers by driving them to offshore platforms.

Simultaneously, the Commodity Futures Trading Commission (CFTC) filed an emergency motion to block New York’s enforcement efforts. The CFTC contends that the state’s actions interfere with its exclusive authority under the Commodity Exchange Act to regulate designated contract markets such as Kalshi. The CFTC has adopted similar stances in disputes across at least nine states, arguing that allowing states to prohibit event contracts listed by federally regulated exchanges would create conflicting state regulations and undermine federal commodities oversight.

Prediction markets facilitate the buying and selling of contracts linked to future event outcomes, with prices reflecting the market’s estimated probability of an event occurring. Kalshi’s competitor, Polymarket, has also faced regulatory scrutiny, with several nations restricting or investigating its operations due to gambling and licensing concerns.

Kalshi expanded into blockchain-based infrastructure in December 2025, launching tokenized prediction markets on Solana and later integrating support for multiple blockchain networks. The broader prediction market sector has experienced growth, particularly around major sporting events. Chainalysis, an analytics firm, reported that blockchain-based prediction markets processed approximately $20 billion in trading related to the 2026 FIFA World Cup, involving over 400,000 wallets.