New York Sues Kalshi, Calling the Prediction Market Plain Gambling and Demanding Triple Its Revenue

New York sued the prediction market Kalshi on Thursday, with Attorney General Letitia James and Gov. Kathy Hochul asking a state court to shut the platform down in New York, order restitution to users, force the company to forfeit its profits and impose fines equal to three times the revenue it has generated in the state.

The complaint's argument is simple: whatever Kalshi calls its contracts, New York law calls them bets. "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." The state alleges the company operates without a license from the New York State Gaming Commission and allowed users below the state's legal gambling age of 21 to trade.

Kalshi's defense rests on federal preemption. The company is registered with the Commodity Futures Trading Commission as a designated contract market, and it argues that status places its event contracts under exclusive federal jurisdiction, beyond the reach of state gaming regulators. A company spokeswoman called the New York suit "political theater," said Kalshi is a "federally licensed exchange," and warned that enforcement would "hurt New Yorkers, who would be driven offshore."

The numbers explain the urgency on both sides. Combined monthly trading volume across Kalshi and rival Polymarket reached roughly $24 billion in April 2026, up from under $5 billion in September 2025 — a nearly fivefold increase in seven months. For comparison, legal U.S. sports betting handles about $14 billion in an average month. State officials estimate the migration has siphoned around $1.2 billion in gaming tax revenue nationally, money that flows to states under licensed sportsbook regimes but not under federally regulated exchanges.

New York is not the first mover. Arizona filed criminal charges against Kalshi in March, and a growing bloc of states with mature licensed sports-betting markets has issued cease-and-desist letters. The company has largely won the early rounds in federal court, where judges in New Jersey and Nevada declined to enjoin its operations while the preemption question is litigated.

The dispute sits on top of an unresolved federal policy question. The CFTC has not finished a rulemaking on sports-related event contracts, and the Trump administration has publicly aligned itself with the industry, with the president pledging federal protection for prediction markets in May. Until either the CFTC acts or an appellate court rules on preemption, the fight will be settled state by state.