New York has filed a $36 billion lawsuit against Kalshi, accusing the prediction-market platform of operating as an illegal gambling operation. The suit, initiated by Governor Kathy Hochul and Attorney General Letitia James, alleges that Kalshi violated the New York State Constitution and the Federal Interstate Wire Act by offering unauthorized sports betting. The state seeks compensatory damages that include customer refunds and substantial civil penalties for each illegal bet facilitated in New York.

Attorney General Letitia James emphasized that regardless of Kalshi’s self-description, its prediction markets are essentially gambling platforms violating state laws. Kalshi, headquartered in New York City, responded by moving the case to federal court, anticipating a more favorable legal environment. The Commodity Futures Trading Commission (CFTC), which regulates prediction markets at the federal level, has also requested an emergency injunction to prevent state enforcement actions against Kalshi and similar platforms.

This recent lawsuit comes on the heels of a court ruling where Kalshi’s attempt to block New York from enforcing its gambling laws was denied by the Second Circuit. The legal battles over Kalshi’s sports-event contracts are not confined to New York; various states and regulatory bodies have been challenging the company and other prediction-market operators such as Polymarket and Robinhood since these contracts launched in January 2025. The ongoing disputes suggest a growing regulatory struggle over the future of sports betting platforms.

Kalshi’s CEO Tarek Mansour remains confident in the company’s legal position despite the intensified scrutiny. Experts predict the conflict will likely escalate to the U.S. Supreme Court, though not until sometime next year. With competing interests between state regulators and federal authorities like the CFTC, the outcome of these cases could have major implications for the regulation and legitimacy of prediction-market platforms in the United States.