NEW YORK (BLOOMBERG) -- New York sued Kalshi Inc.’s trading subsidiary for allegedly running an illegal, unlicensed gambling operation in the state, marking another major legal hurdle for an industry that has won support from the Trump administration.
The suit, filed Friday in state court in Manhattan, alleges that Kalshi’s prediction market exposes state residents – including those under the legal gambling age of 21 – to “serious personal and financial risk,” New York Attorney General Letitia James said in a statement.
Kalshi is accused in the lawsuit of failing to seek a license from the New York State Gaming Commission and avoiding paying taxes “like licensed casinos and mobile sports gambling platforms do.”
“Kalshi has chosen to ignore New York’s gaming laws, which exist to protect consumers, prevent problematic gambling, deliver funding for critical public services, and ensure that every company plays by the same rules,” New York Governor Kathy Hochul said in the same statement.
“It’s sad to see this type of political theater from the leadership in our own state,” Kalshi spokeswoman Elisabeth Diana said in a statement. “States can’t just shut down a federally licensed exchange. This would also hurt New Yorkers, who would be driven offshore.”
The suit is the latest legal twist for Kalshi. Earlier this month, a New York judge ruled that Kalshi can’t prevent the state’s gaming officials from regulating its sports prediction markets like sportsbooks, dealing a legal blow to prediction market providers in the booming industry.
New York alleges that Kalshi’s prediction markets “meet the legal definition of gambling because the outcomes of the events on which its users are betting are uncertain and outside the control of the bettor or hinge on a game of chance,” according to the statement.
Earlier this month, a federal judge temporarily halted enforcement of Minnesota’s first-in-the-nation law barring prediction markets, finding that some of the contracts could be considered financial instruments under the exclusive jurisdiction of a federal agency. The injunction had been sought by the Commodity Futures Trading Commission, Kalshi, and Polymarket.
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