New York Sues Kalshi for $36B Over Gambling
New York Attorney General Letitia James filed suit against prediction market platform Kalshi on July 31, seeking at least $36 billion and an immediate halt to its operations in the state. The petition, filed in Manhattan state court under Executive Law 63(12), argues that Kalshi’s event contracts tied to sports, elections, and television outcomes meet New York’s legal definition of gambling, regardless of how the company labels them. James was direct: “No matter what they call themselves, prediction markets like Kalshi are gambling platforms, plain and simple.”
The financial exposure is enormous and deliberately constructed. New York is pursuing disgorgement of all proceeds, treble damages under Penal Law 80.10, and a $100,000 penalty for each unauthorized sports-wagering offer under the Racing Law. The $36 billion figure is preliminary and tied to Kalshi’s scale: the platform reported roughly $33 billion in monthly trading volume in June and claims a $22 billion valuation with $178 billion in annualized transaction volume. Investigators from the AG’s office placed trades on a UConn-Michigan basketball game and a Big Brother winner market from New York accounts to build their evidentiary record. The state also says Kalshi listed contracts on New York college teams, including a Siena-Duke matchup that licensed sportsbooks are barred from offering, and allowed users aged 18 to 20 to trade despite a state minimum age of 21 for sports betting.
CFTC Fires Back Before New York Even Files
Less than an hour before the state petition landed, the Commodity Futures Trading Commission filed an emergency motion in Manhattan federal court demanding that New York be blocked from pursuing any civil or criminal enforcement against Kalshi and other federally registered prediction market exchanges. The CFTC’s position is straightforward: as a designated contract market, Kalshi operates under exclusive federal jurisdiction via the Commodity Exchange Act, and state gambling law simply does not apply. The agency has taken equivalent positions against at least nine states, consistent with its broader push to control the regulatory framework for event contracts.
That federal shield has not held in court so far. U.S. District Judge Analisa Torres denied Kalshi’s injunction bid on July 7, ruling that New York’s interests in curbing gambling addiction and protecting sports integrity outweighed the company’s preemption arguments. On July 29, a Second Circuit judge refused emergency relief and passed the injunction motion to a three-judge panel, leaving Kalshi exposed once the penalty pause New York granted in October 2025 expired. Kalshi is appealing Torres’s ruling, but it has lost every procedural battle to date.
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Hyperliquid HYPE$52.20▼4.50%What This Fight Actually Decides
This is not a narrow dispute about one platform’s New York access. If state courts affirm that New York can treat federally listed event contracts as gambling, every prediction market operator faces a state-by-state compliance maze, fragmented liquidity, and potential retroactive liability on national revenue. Kalshi argues New York cannot shut down a federally licensed exchange; New York counters by invoking the federal Interstate Wire Act against the company on its own turf, which is an aggressive and legally untested move. The court has not found Kalshi liable on any count, and the $36 billion figure will shift as the parties determine which contracts and revenues fall within the case’s scope. Given that Kalshi has lost its last three procedural fights, the company’s confidence about federal protection looks less like a legal argument and more like a hope.
