New York sues Kalshi, says prediction market is running 'illegal gambling operation'

New York state sued prediction market platform Kalshi on Friday, alleging that the company is running an "illegal gambling operation." In a case filed in a Manhattan state court, the lawsuit claims that Kalshi accepts wagers as a gambling business in disregard for the state's constitution and laws by not being registered with the New York State Gaming Commission.

Governor Kathy Hochul in the press release said the state is taking the action to stop what it views as illegal behavior and bring the company into compliance with New York law. The lawsuit is seeking a permanent injunction against Kalshi.

Kalshi, which has its headquarters offices in New York City, expressed disappointment with the decision by the state. "It's sad to see this type of political theater from the leadership in our own state," a Kalshi spokesperson said in a statement. "States can't just shut down a federally licensed exchange… We love New York, we love New Yorkers, and New Yorkers love our product."

The suit by the state is also seeking a total restitution to users who have placed trades on the platform, a $100,000 penalty for each attempt to offer sports wagering, and another penalty three times the amount the company has gained while allegedly operating in violation of New York law.

Kalshi originally sued New York state in October after the state's Gaming Commission sent a cease and desist letter to the company. Earlier this month, a judge for the Southern District of New York denied the company's request for a preliminary injunction and temporary restraining order against the commission.

The same judge denied a request by Kalshi earlier this month for an injunction pending an appeal.

The Commodity Futures Trading Commission, which sees itself as the federal regulator for prediction markets, filed for a temporary restraining order against enforcement actions by New York just before the state's lawsuit was announced. That comes after the CFTC in April sued the state, requesting a permanent injunction from enforcing its state laws on commission-registered platforms.

States across the country are locked in battles with the federal government and platforms over prediction markets, which have seen their volumes surge as their sports-related event contracts have become popular with retail traders. Kalshi — along with other prediction market platforms — and the CFTC believe all event contracts ar...