New York State has sued Kalshi, alleging its prediction market operates as unlicensed gambling.
New York Governor Kathy Hochul and Attorney General Letitia James have announced a lawsuit against Kalshi, accusing the company of running an illegal gambling operation through its prediction market platform. The lawsuit follows an investigation by the Office of the Attorney General (OAG), which concluded that Kalshi's platform meets the legal definition of gambling under New York law.
Kalshi launched in 2021, allowing users to place bets on the outcome of future events. In 2025, the company introduced sports 'trading', which it described as legal sports betting accessible across all fifty US states. The platform currently allows users to bet on outcomes across sports, culture and elections through its website and app.
According to the OAG, Kalshi's markets qualify as gambling because they involve uncertain outcomes that are outside a bettor's control or dependent on chance. The lawsuit states that Kalshi has not obtained a licence from the New York State Gaming Commission, and as a result has not paid the taxes that licensed casinos and mobile sports gambling operators are required to pay. That tax revenue, the OAG notes, funds public schools, youth sports programmes, and problem gambling treatment services.
A further allegation concerns access by users aged 18 to 20, below the state's minimum age of 21 for mobile sports betting. The OAG cited research linking underage gambling to psychological distress, financial difficulty, and a higher risk of gambling-related harm later in life.
According to the announcement, the OAG is asking the court to order Kalshi to forfeit gains obtained through the alleged illegal activity, pay restitution to affected users, and pay fines equal to three times those gains. Governor Hochul said the state's gaming laws exist to protect consumers and ensure a level playing field, while Attorney General James stated that prediction markets meet the legal definition of gambling regardless of how they are described.
Wider enforcement context
The Kalshi lawsuit forms part of a broader enforcement effort by Hochul and James. In April 2026, the Attorney General's office sued Coinbase and Gemini over allegedly illegal gambling platforms, and Governor Hochul signed an executive order barring state employees from using prediction markets such as Kalshi for trading. In January 2026, the OAG sued video game developer Valve over the alleged promotion of gambling through games popular with younger audiences. The New York State Gaming Commission had previously issued a cease-and-desist demand to Kalshi in October 2025 over its mobile sports wagering activity, and in June 2025 the Attorney General's office shut down 26 unlicensed online sweepstakes casinos.
The case adds to a wider regulatory debate in the US over how prediction markets should be classified and licensed, particularly where their offerings overlap with sports betting. The outcome may influence how other states approach the licensing and taxation of similar platforms operating without state gaming approval.
