The lawsuit adds to a growing clash between New York and the CFTC over whether federally regulated prediction markets are subject to state gambling laws.
[Update 11:45 UTC, July 31: Adds Kalshi’s response in the sixth and seventh paragraphs.]
New York has sued prediction market platform Kalshi, alleging it operates an illegal, unlicensed gambling business by offering event contracts on sports, elections and other outcomes.
The lawsuit seeks to stop Kalshi’s alleged illegal gambling operation in the state, require the company to forfeit illegal gains, pay restitution to users and pay civil penalties equal to three times those gains.
“No matter what they call themselves, prediction markets like Kalshi are gambling platforms, plain and simple,” Attorney General Letitia James said in Friday’s statement. “We are taking them to court to uphold our laws and protect New Yorkers.”
The lawsuit comes after the New York State Gaming Commission issued Kalshi a cease-and-desist order in October 2025, prompting the company to sue the regulator in federal court.
A judge denied Kalshi’s request for a preliminary injunction in July, and an appeals court later rejected its bid to block enforcement while the appeal proceeds.
“It’s sad to see this type of political theater from the leadership in our own state. States can’t just shut down a federally licensed exchange,” Elisabeth Diana, Kalshi’s head of communications, said in a statement shared with Cointelegraph.
“This would also hurt New Yorkers, who would be driven offshore,” she added.
The lawsuit adds to an escalating jurisdictional dispute over whether event contracts offered by federally regulated prediction markets are subject to state gambling laws.
Just before New York filed its case, the Commodity Futures Trading Commission (CFTC) filed an emergency motion seeking to block New York’s enforcement efforts, arguing that the state’s actions interfere with the agency’s exclusive authority under the Commodity Exchange Act to regulate designated contract markets like Kalshi.
Related: CFTC issues second warning to prediction markets on cookie-cutter self-certifications
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