Buffalo, N.Y. (WBEN) - New York State announced on Friday it is suing the betting app Kalshi, claiming it is running an illegal gambling operation through its prediction market platform.
The lawsuit 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. Despite this, Kalshi has failed to obtain a license from the New York State Gaming Commission (Gaming Commission), sidestepping its obligation to pay taxes like licensed casinos and mobile sports gambling platforms do.
Former New York Attorney General and local attorney at Lippes Mathias LLP, Dennis Vacco is not all that surprised by this lawsuit, given the fact that several other states have already taken similar action against Kalshi. In addition to the fact that New York also recently issued a cease and desist letter to Kalshi in October 2025 for its ongoing operation of an unlicensed mobile sports wagering platform in the state.
"Essentially, what the letter said is you're not registered to do business in New York State, and you're not paying any taxes. So, at least, in October of last year, the state agency that regulates gaming in the state already put them on notice about the fact that they weren't properly registered. But it seemed that that letter, at the time, was about the fact that they were paying taxes to the State of New York," said Vacco in an interview with WBEN.
Vacco calls the lawsuit filed Friday an extension of the cease and desist order.
Because of the fact Kalshi is not registered in New York, it seems to be a pretty simple case to show the app is not properly licensed by the New York State Gaming Commission. However, Vacco feels this lawsuit is designed to go even further.
"I think that the lawsuit is also designed to shut them down. Not just simply to get them registered, but I think the gravamen of the lawsuit now is to shut them down, which is interesting because it's such a popular now site, popular gaming site, if you will," Vacco said.
There is one complication, though, that could throw a wrench into New York's lawsuit against Kalshi.
"Interestingly, the federal government through the Commodities Futures Trading Commission (CFTC), which since the 1990s has regulated, what they refer to as, event contracts. So the federal government has actually sued Arizona, Illinois, and Connecticut to prevent them from enforcing state laws against Kalshi," Vacco noted. "I think what remains to be seen here is whether or not the feds, through the Commodity Futures Trading Commission, tries to you know sue to prevent New York State from advancing this litigation."
Vacco adds if there are other similar apps - Polymarket, for instance - that if they are not properly registered with the New York State Gaming Commission, they could be next to face similar legal action.
Now that New York has taken legal action against Kalshi, Vacco could absolutely see more states across the U.S. following suit.
"I do think even though there are several other states - maybe as many as six - who have filed lawsuits or criminal charges, I think that once New York gets involved, New York always sort carries a big stick in enforcement issues. I do think we will see other states now not necessarily join this litigation, because it's rather specific to New York State law, but I would anticipate there would be other states that file 'me too' lawsuits that are similar in nature beyond the six that are already filed," he said.
The State Attorney General's Office is asking the court to order Kalshi to forfeit all illegal gains, distribute restitution to consumers who were harmed, and pay fines equal to three times the gains the company made through its illegal actions.
