Photo: MARTIN LELIEVRE / AFP / Getty Images
New York State has filed a lawsuit against the prediction market platform Kalshi, alleging it operates as an illegal gambling operation. On Friday (July 31), Governor Kathy Hochul and Attorney General Letitia James announced the legal action, following recent federal court rulings that allowed New York to enforce its gambling regulations against Kalshi.
Kalshi enables users to bet on the outcomes of various events, from politics to sports. The state argues that these activities fit the legal definition of gambling, as the outcomes are uncertain and outside the bettor's control. The lawsuit claims that Kalshi has not obtained a license from the New York State Gaming Commission, which would require them to pay taxes used for public services like education and sports programs.
The state is seeking to shut down Kalshi or require it to become licensed, and demands the forfeiture of illegal earnings, restitution to users, and fines amounting to three times the gains made through its operations. The lawsuit also highlights that Kalshi allows users as young as 18, while New York law requires mobile sports bettors to be at least 21.
Kalshi, headquartered in New York, argues that it operates differently from traditional gambling platforms and maintains that it is a federally licensed exchange. The company has faced similar legal challenges in other states, with Massachusetts, Michigan, Nevada, and Washington also restricting its activities.
The U.S. Commodity Futures Trading Commission (CFTC) has claimed exclusive oversight of prediction markets and has challenged New York's regulatory actions, filing an emergency motion to stop the state's enforcement. This legal battle highlights the ongoing tension between state and federal regulation of prediction markets.