New York is taking its fight against prediction markets to court, with Gov. Kathy Hochul and Attorney General Letitia James announcing Friday (July 31) that the state has sued Kalshi, alleging the federally regulated prediction market operator is running an illegal gambling business by offering contracts on sports, elections and other future events without a New York gaming license.
The lawsuit, filed in New York Supreme Court under Executive Law § 63(12), which gives the Attorney General power to investigate and stop repeated fraud or illegal acts in business, seeks a permanent order blocking Kalshi from operating in the state. It also asks the court to require the company to give up its alleged profits, compensate customers, provide a full accounting of wagers and losses, and pay civil penalties, including fines equal to three times its alleged illegal gains.
The legal action follows a series of moves by New York targeting prediction markets. In April, Hochul signed an executive order barring covered state employees from using confidential government information to profit from prediction market trades or to help others do so. State officials said the order was intended to address concerns that public servants could misuse nonpublic information on emerging trading platforms and to reinforce public trust as prediction markets continue to expand.
“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,” Hochul said in a statement. “This choice has consequences, and working closely with Attorney General James, New York is taking action to stop this illegal behavior and bring Kalshi into compliance, because no company is above the law.”
James said the company cannot avoid New York gambling laws simply by describing its products as prediction markets.
“New York’s gambling laws protect children from underage betting and help combat gambling addiction,” James said. “No matter what they call themselves, prediction markets like Kalshi are gambling platforms, plain and simple. By ignoring our laws, Kalshi is running an illegal operation and harming New Yorkers in the process. We are taking them to court to uphold our laws and protect New Yorkers.”
New York argues Kalshi is operating an unlicensed gambling business
According to the verified petition, Kalshi launched its prediction market platform in 2021 before expanding into sports markets in January 2025. The company promoted those offerings as “legal sports markets, accessible to Americans in all 50 states.”
New York argues those contracts amount to unlawful gambling because customers risk money on future contingent events outside their control while Kalshi does not hold a state gaming license.
The petition also claims Kalshi has become a multibillion-dollar business while operating outside New York’s gambling regulatory framework.
“Respondent has reported a $22 billion valuation of its gambling business and an annualized transaction volume of $178 billion,” the petition states, adding that the company seeks to avoid “the legal and financial consequences of New York’s close regulation of gambling by offering what is quintessentially wagering under the guise of ‘event contracts’ on a ‘prediction market.’”
The complaint alleges Kalshi has violated multiple provisions of New York law, including constitutional restrictions on unauthorized gambling, criminal gambling statutes, sports wagering laws and the federal Wire Act. State lawyers are asking the court to permanently block the company from operating in New York while also ordering restitution, disgorgement, an accounting of customer activity and statutory penalties.
In a memorandum supporting a temporary restraining order, the attorney general’s office argued that immediate court intervention is necessary because Kalshi allegedly continues operating despite earlier enforcement efforts. The filing says the company has engaged in “repeated and persistent illegality” in violation of Executive Law § 63(12) and seeks both preliminary and permanent injunctive relief.
New York says Kalshi ignored regulators and continues breaking state law
The state also submitted an emergency affirmation from Investor Protection Bureau Chief Shamiso Maswoswe, seen by ReadWrite, who argued New Yorkers continue to face harm while Kalshi remains available.
“I submit this affirmation of emergency because Respondent is presently violating the laws of this State,” Maswoswe wrote, noting that the New York State Gaming Commission ordered Kalshi to cease operations in October 2025 but that “each day these unlicensed and underregulated entities are operating within and from New York subjects New Yorkers to actual harm.”
Maswoswe also alleged that Kalshi ignored the Gaming Commission’s cease-and-desist order by suing the regulator and continuing to operate after a federal judge denied its request for a preliminary injunction in July.
“Respondent continues to operate its gambling platform from New York,” the affirmation states.
The proposed temporary restraining order would immediately prohibit Kalshi from offering contracts tied to sports, elections, culture and other events without state licenses. It would also prevent wagering by people under 21 and bar the company from advertising or promoting its platform while the litigation moves forward. The state is additionally seeking restitution, disgorgement, penalties and a detailed accounting of customer wagers and losses.
Court filings show New York has requested assignment to the Commercial Division and estimates the value of the requested accounting and related monetary relief at roughly $36 billion, in addition to broad injunctive relief and statutory penalties.
Lawsuit expands New York’s broader crackdown on prediction markets
The lawsuit comes as New York continues increasing oversight of prediction markets and related financial platforms. Hochul’s April executive order prohibited covered state officers and employees from using confidential government information to profit from prediction market trades, warning that newer trading platforms create opportunities for insider activity that existing ethics rules must address.
When announcing that order, Hochul said, “Getting rich by betting on inside information is corruption, plain and simple,” adding that the state’s actions were intended to ensure public employees serve the public rather than pursue personal financial gain. Her administration also cited growing public scrutiny of prediction markets and said unlicensed platforms warrant closer regulatory attention.
At the same time, state Sen. Joseph Addabbo Jr. has proposed legislation that would establish a regulated framework for prediction markets in New York rather than leaving the activity unlicensed or offshore.
Friday’s lawsuit represents New York’s most aggressive challenge yet against Kalshi. Along with seeking to halt the company’s operations in the state, the attorney general’s office is asking the court to require Kalshi to surrender its alleged illegal gains, compensate affected consumers and pay significant civil penalties. Kalshi had not responded in the materials provided with the lawsuit to the allegations filed Friday.
Featured image: Marc A. Hermann / MTA / CC BY 2.0 / Canva / Kalshi
The post New York sues Kalshi alleging illegal prediction markets defying state gambling laws appeared first on ReadWrite.
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