New York is suing Kalshi for allegedly running an "illegal gambling operation" by letting people place bets through its online prediction market platform. The new lawsuit follows several state-level legal challenges against Kalshi in the US, including in Nevada and Arizona. Other states similarly view Kalshi's platform as a tool for gambling, something the Commodity Futures Trading Commission (CFTC), the regulator in charge of prediction markets, vehemently disagrees with.

The New York lawsuit alleges that Kalshi meets the legal definition for gambling because it lets people bet on events that hinge on chance or are otherwise uncertain and not controlled by the person placing the bet. By letting users bet without obtaining a license from the New York State Gaming Commission, not paying taxes like casinos and traditional betting apps and offering its services to people under the age of 21, New York believes Kalshi has violated the law.

"New York's gambling laws protect children from underage betting and help combat gambling addiction," New York Attorney General Letitia James said in a statement. "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."

The state 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." 

Engadget has asked Kalshi to comment on New York's lawsuit. We'll update this article if we hear back.

Legal precedent is not totally on New York's side. New Jersey's attempt to ban Kalshi was overruled by a US Circuit Court of Appeals judge in April 2026. Perhaps unsurprisingly, the Trump administration has a direct connection to both Kalshi and Polymarket: Donald Trump Jr. has invested in the latter and is an advisor to the former. CFTC Chairman Mike Selig has also already come out against New York's lawsuit and suggested he'll take action in a post on X.

"Rather than seek reasoned answers from the courts, Letitia James and New York seek to force an unprecedented sudden shutdown of prediction markets nationwide," Selig says. "The @CFTC has already sued to stop this and will continue to defend its jurisdiction."