New York sued prediction-market platform Kalshi on Friday, calling it an "illegal, unlicensed gambling operation" and asking a Manhattan judge to halt its business in the state and force it to hand over profits state officials estimate at $36 billion.
Attorney General Letitia James and Gov. Kathy Hochul, both Democrats, filed the case in state Supreme Court, seeking forfeiture of profits, restitution to consumers and fines equal to three times Kalshi's gains. The suit escalates a national fight over whether federally licensed event contracts — trades on outcomes ranging from elections to the weather — fall under state gambling laws or the exclusive authority of the Commodity Futures Trading Commission.
What the state alleges
"No matter what they call themselves, prediction markets like Kalshi are gambling platforms, plain and simple," James said. Court papers argue a temporary injunction is needed "to contain the irreparable harm that widely available, illegal mobile gambling poses to problem gamblers and populations susceptible to addiction." Hochul said Kalshi had "chosen to ignore New York's gaming laws" after weeks of talks between the company and state officials over tax and consumer-protection issues.
The federal turf war
The lawsuit landed two days after a federal appeals court declined to pause a lower-court ruling that state gambling laws can reach Kalshi despite its federal registration. Hours later, the CFTC asked the presiding federal judge to block New York from enforcing its statutes, arguing Congress gave the agency exclusive authority over prediction markets. In a court filing, the commission warned that state enforcement "has the potential for a single state to bring entire federally regulated markets to the brink of destruction." New York filed a parallel case against Coinbase and Gemini on similar grounds in April.
A patchwork of rulings
A federal judge in Minnesota this week barred that state from enforcing its gambling laws against Kalshi and rival Polymarket, finding the exchanges are federally regulated designated contract markets under CFTC jurisdiction. Nevada, Michigan and Washington have halted some or all of Kalshi's operations through litigation, though the company is challenging those rulings.
Kalshi's rebuttal
Kalshi spokesperson Elisabeth Diana called the New York suit "political theater from the leadership in our own state" and said the state cannot shut down "a federally licensed exchange." CFTC Chairman Michael Selig, writing on social media Friday, accused James of moving "to force an unprecedented sudden shutdown of prediction markets nationwide" and pledged the agency would "continue to defend its jurisdiction." Kalshi argues its event contracts qualify as "swaps" under the Commodity Exchange Act — a definition it says places the trades within the CFTC's sole reach and would keep a single state from fracturing a market Congress assigned to a federal regulator.
The Manhattan court has not set a hearing date. The CFTC's April preemption suit against New York remains pending in federal court.