New York Sues Kalshi, Calling Its Prediction Market Gambling Under State Law
New York Attorney General Letitia James sued KalshiEX LLC in Manhattan Supreme Court on July 31, alleging the company operates an unlicensed gambling business in the state under the label of a “prediction market.” The petition, brought under Executive Law § 63(12), seeks a court order finding that Kalshi has engaged in repeated and persistent illegality.
The action targets the sports and event wagering offered on Kalshi’s website and mobile application, which the state characterizes as prediction market gambling subject to New York’s constitution, penal law, and gaming regulation. According to the verified petition filed by the Office of the Attorney General, Kalshi accepts wagers from New Yorkers without any license from the New York State Gaming Commission.
Kalshi lists binary contracts on future events and has expanded from macroeconomic and political questions into sports outcomes. The company, which CNBC reported is headquartered in New York City, disputes the state’s authority to bring the case. A Kalshi spokesperson told CNBC the filing was “this type of political theater from the leadership in our own state” and that “[s]tates can’t just shut down a federally licensed exchange.” Chief executive Tarek Mansour said in an August 3 broadcast interview that the platform is operating under federal rules.
What the Petition Alleges
The petition frames Kalshi’s product as wagering that meets New York’s constitutional and statutory definitions of gambling. The state relies on Article I, § 9 of the New York Constitution, which the petition describes as prohibiting the risking of something of value on a future contingent event not under the bettor’s control, in exchange for something of value on a specified outcome.
Building on that constitutional footing, the petition alleges violations of Penal Law § 225.05, for knowingly advancing and profiting from unlawful gambling activity, and § 225.10, for receiving and accepting in any one day more than five bets totaling more than $5,000. A fourth count invokes Penal Law § 225.20, for possessing, with knowledge of its contents, material “of a kind commonly used in the operation or promotion of a bookmaking scheme or enterprise” reflecting more than five bets totaling more than $5,000.
Two further counts arise under the Racing, Pari-Mutuel Wagering and Breeding Law: § 1367(16)(a), for knowingly offering or attempting to offer unauthorized sports wagering in New York, and § 1367-a(2)(a), for making a mobile sports wagering platform available to persons in New York without a license. The petition also asks the court to enjoin violations of Racing Law § 1367-a(4)(b) and of the federal Interstate Wire Act, 18 U.S.C. § 1084(a), on the theory that Kalshi used wire communication facilities to transmit bets, information assisting in placing them, and confirmations of resulting payments.
The state points to Kalshi’s own marketing. The company announced sports “trading” on January 23, 2025, and, according to the petition, invited the public to “view live sports (and bet)” on the platform, advertising “[l]egal sports markets, accessible to Americans in all 50 states” and inviting users to “[b]et on the NFL, legal in 50 states.” The petition identifies specific offerings, including markets on the February 8, 2026 Super Bowl and a March 20, 2026 college basketball game between Hofstra University and the University of Alabama.
What the State Is Asking For
The petition reports a $22 billion valuation of Kalshi’s business and an annualized transaction volume of $178 billion, attributing both figures to the company. It alleges Kalshi has done this, in the petition’s words, by offering “what is quintessentially wagering under the guise of ‘event contracts’ on a ‘prediction market.'” The company is not licensed with the New York State Gaming Commission in any capacity, according to the petition.
On remedies, the petition asks the court to permanently enjoin Kalshi from operating an unlicensed gambling business in New York, to order an accounting of every bet placed and every dollar customers lost, and to direct restitution and disgorgement. It seeks a penalty of three times Kalshi’s gain from the alleged conduct under Penal Law § 80.10, and a separate penalty of $100,000 for each offering or attempted offering of sports wagering in New York without authorization under Racing Law § 1367(16)(a). It also asks that the injunction reach advertising and promotion, including on college campuses, and bar wagers from anyone under 21.
The petition does not total those penalties. CNBC reported that the state estimates the combined figure could reach $36 billion.
Why Kalshi Says a Federal License Shields Its Prediction Market
Kalshi’s response rests on its federal status as an exchange, and the company has already been litigating that position against New York for months. Kalshi sued the state in October, after the Gaming Commission sent it a cease and desist letter. A judge in the Southern District of New York denied Kalshi’s request for a preliminary injunction and a temporary restraining order against the commission earlier this month, CNBC reported, then denied a request for an injunction pending appeal.
Brian Quintenz, a Kalshi board member, called the state’s filing “an unhinged, and extraordinarily egregious piece of lawfare that’s designed to shut down not only some aspects of prediction markets but all aspects of prediction markets” in a Friday appearance on CNBC’s “Squawk on the Street.”
The federal regulator has entered the fight directly. The Commodity Futures Trading Commission, which treats itself as the regulator for prediction markets, filed for a temporary restraining order against New York’s enforcement actions shortly before the state announced its suit, according to CNBC, and had already sued the state in April seeking a permanent injunction against enforcing its gambling laws against commission-registered platforms. CFTC Chairman Michael Selig wrote in a post on X that New York was seeking “to force an unprecedented sudden shutdown of prediction markets nationwide” and that the commission “has already sued to stop this and will continue to defend its jurisdiction.”
The New York petition does not engage the preemption question on its face. It proceeds as a state gambling enforcement action under Executive Law § 63(12).
The § 63(12) Vehicle
Executive Law § 63(12) does not require the state to prove a criminal gambling offense to a criminal standard. It allows the Attorney General to establish repeated or persistent illegality as the predicate for civil relief, including disgorgement, which is why the six counts are pleaded as § 63(12) violations resting on underlying constitutional, penal and racing-law provisions rather than as freestanding criminal charges.
The Announcement and What Comes Next
Governor Kathy Hochul and Attorney General James announced the filing jointly. In the accompanying press release, James said that “no matter what they call themselves, prediction markets like Kalshi are gambling platforms, plain and simple,” and that the company was “harming New Yorkers in the process.”
The Associated Press reported that the New York action is part of a running dispute over whether such platforms are financial exchanges or, as state regulators argue, sportsbooks in another form.
The matter is pending in New York Supreme Court, New York County, and the Attorney General’s office says it is being handled by the Investor Protection Bureau. No index number appears on the copy of the verified petition released by the office. Kalshi has not yet filed a response.
