New York Attorney General Letitia James and Governor Kathy Hochul filed a high-profile lawsuit against prediction market exchange KalshiEX in New York Supreme Court, seeking at least $36 billion in compensatory damages, treble-gains penalties, and fines of $100,000 per unauthorized sports wagering offer. The state simultaneously requested a temporary restraining order to immediately halt Kalshi’s event contracts in New York, citing harm to consumers and ongoing violations of state gaming laws.
Allegations of Unlicensed Gambling and Age Violations
The core claim in the state’s filing asserts that Kalshi operates an unlicensed gambling business within New York. State officials argue that allowing users to trade binary event contracts on sporting events, awards shows, and political outcomes constitutes sports wagering rather than regulated derivatives trading.
According to the complaint, state investigators created test accounts and successfully executed wagers on college basketball games and reality television outcomes without meeting New York’s licensing or age verification requirements. The filing alleges that Kalshi permitted users between 18 and 20 years old to place bets, violating New York’s 21-and-older age minimum for mobile sports wagering. Additionally, the state cited violations of the federal Interstate Wire Act, expanding the lawsuit beyond state regulatory compliance into federal statutory territory.
The Financial Scale and Strategic Importance of Sports Contracts
The $36 billion relief sought by New York represents a staggering financial demand, exceeding Kalshi’s reported $22 billion valuation by over 60%. The state’s release highlighted that Kalshi processed over $1 billion monthly in volume during 2025, with sports-related contracts accounting for approximately 90% of total platform activity.
This concentration emphasizes the critical nature of sports contracts to Kalshi’s current business model. If state enforcement actions or pending federal legislation succeed in banning sports-based event contracts, the platform risks losing the vast majority of its transaction volume.
Federal Preemption Defense vs. State Enforcement
Kalshi has maintained that its operations fall exclusively under federal jurisdiction. The platform relies on its 2020 registration with the Commodity Futures Trading Commission (CFTC) as a designated contract market, arguing that its event contracts are federal swap derivatives protected by preemption under the Commodity Exchange Act. Kalshi representatives labeled the lawsuit political theater and warned that shutting down regulated US exchanges would push consumers toward unmonitored offshore options.
However, the legal shield provided by federal registration has faced growing scrutiny. In July, US District Judge Analisa Torres denied Kalshi a preliminary injunction against New York regulators, ruling that federal commodities law does not completely strip states of their traditional authority to regulate gambling.
New York’s lawsuit arrives alongside a broader multi-state movement. A coalition of 38 state attorneys general previously filed an amicus brief supporting Massachusetts in its separate legal action against Kalshi, while states such as Nevada, Michigan, and Arizona have pursued similar legal restrictions or temporary restraining orders against prediction platforms.
