New York Attorney General Letitia James sued Kalshi on July 31, seeking to block the prediction-market operator from offering alleged illegal gambling products in the state and asking for at least $36 billion in damages, restitution, disgorgement, and penalties. The case now sits alongside a separate CFTC lawsuit arguing that New York cannot apply state gambling laws to federally registered contract markets.
What did New York file against Kalshi?
James filed a petition in New York state court in Manhattan alleging that Kalshi operates an unlicensed gambling platform by allowing users to trade event contracts tied to sports, elections, culture, and other outcomes. Reuters reported that the petition says Kalshi failed to obtain a license from the New York State Gaming Commission, the state agency that regulates legal sports wagering.
The state’s filing asks the court to stop Kalshi’s New York operations and require consumer restitution, disgorgement of proceeds, civil penalties, and a full accounting. The Block, citing court filings, reported that New York’s requested compensatory damages could total at least $36 billion, with the state also seeking treble gains and $100,000 for each alleged unlawful offering.
James framed the case as a consumer-protection and gambling-law enforcement action. In the attorney general’s public statement reported by Reuters, she said New York’s gambling laws protect children from underage betting and help address gambling addiction. Gov. Kathy Hochul also backed the action, saying in a statement reported by The Block that Kalshi had chosen to ignore state gaming laws.
Why is New York treating Kalshi like a sportsbook?
New York’s legal theory is that Kalshi’s event contracts fit state gambling definitions when customers stake money on uncertain outcomes outside their control, especially sports outcomes. The state says Kalshi has not been licensed by the New York State Gaming Commission, while licensed mobile sports-wagering operators must comply with state rules, age limits, tax obligations, and responsible-gambling controls.
The tax issue is material. The New York State Gaming Commission says mobile sports-wagering revenue is taxed at 51 percent, with most revenue directed to public education and annual set-asides for youth sports and problem-gambling education and treatment. New York law also defines a “minor” for sports wagering as a person under 21, while state officials have alleged prediction-market platforms were available to users younger than that threshold.
New York has taken a similar posture toward other prediction-market operators. On April 21, James sued Coinbase Financial Markets and Gemini Titan, alleging that their prediction-market offerings constituted unlicensed gambling operations in New York. Three days later, on April 24, James joined 37 other attorneys general in an amicus brief supporting Massachusetts’ lawsuit against Kalshi in the Massachusetts Supreme Judicial Court.
What is the CFTC’s competing case?
The Commodity Futures Trading Commission has taken the opposite position: that event contracts traded on registered derivatives exchanges fall under federal commodities law and cannot be regulated state by state as gambling. In CFTC Release No. 9218-26, dated April 24, the commission said it had sued New York in the U.S. District Court for the Southern District of New York to stop the state from applying gambling laws against CFTC-registered contract markets.
The CFTC’s New York complaint seeks a declaratory judgment that federal law gives the agency exclusive authority over event contracts traded on registered entities and a permanent injunction against state enforcement that the agency says is preempted. Chairman Michael S. Selig said in the CFTC release that New York was seeking to enforce state gambling laws against CFTC-registered exchanges and that the agency would not allow state governments to undermine its authority over those markets.
Kalshi’s federal status is not in dispute. CFTC records show Kalshi was designated as a contract market on November 3, 2020, and the CFTC announced the designation on November 4, 2020, in Release No. 8302-20. That order required KalshiEX to comply with the Commodity Exchange Act and CFTC regulations applicable to designated contract markets.
How did Kalshi fare in federal court in New York?
Kalshi lost an important preliminary ruling before New York filed the July 31 petition. In KalshiEX LLC v. Williams, No. 1:25-cv-08846, U.S. District Judge Analisa Torres denied Kalshi’s request for a temporary restraining order and preliminary injunction against New York Gaming Commission officials. The corrected order was dated July 13 and followed a July 7 opinion.
Torres held that Kalshi had not shown a clear or substantial likelihood of success on its argument that the Commodity Exchange Act preempted New York gambling laws as applied to Kalshi’s sports-event contracts. The court noted that Kalshi self-certified several sports-event contracts on January 22, 2025, and that the New York Gaming Commission sent Kalshi an October 24, 2025 cease-and-desist letter directing it to stop making an unlicensed mobile sports-wagering platform available in the state in connection with sports events.
The ruling did not end Kalshi’s federal lawsuit, but it left New York officials free to continue enforcement while the case proceeds. Reuters reported on July 8 that Torres found New York’s interests in preventing gambling addiction, preserving sports integrity, and avoiding unregulated contracts outweighed Kalshi’s claimed harms at the preliminary-injunction stage.
Are courts reaching the same answer in other states?
No. The preemption fight has produced mixed rulings, which is why the New York case matters beyond one state. In the New York order, Torres cited cases that had gone both ways on Kalshi’s theory, including decisions from Tennessee and the Third Circuit favorable to Kalshi’s position and decisions from Arizona, Maryland, Nevada, and the Sixth Circuit that had denied or limited similar relief.
The CFTC has also pursued its own litigation campaign. In Release No. 9220-26, dated April 28, the commission said it had sued Wisconsin after that state filed civil suits against Kalshi, Polymarket, Crypto.com, Robinhood, and Coinbase. The same release said the CFTC had filed lawsuits against Connecticut, Illinois, and New York, and had filed amicus briefs in the U.S. Court of Appeals for the Ninth Circuit and the Massachusetts Supreme Judicial Court.
By June, the CFTC had added more state litigation. Its press-release index lists a June 12 lawsuit against New Mexico, a June 23 lawsuit against Kentucky, and a May 28 lawsuit seeking to block state enforcement in Rhode Island. Those cases reflect the same basic conflict: states argue that sports-related prediction contracts function like gambling, while the CFTC argues that registered event-contract markets fall within federal derivatives jurisdiction.
What is the CFTC doing on event-contract rules?
The commission is also writing rules while it litigates. On March 16, the Federal Register published the CFTC’s advance notice of proposed rulemaking on prediction markets, RIN 3038-AF65, seeking public comment on event-contract derivatives, core principles, public-interest considerations, and contracts that may involve gaming, war, terrorism, assassination, or unlawful activity.
On June 10, the CFTC followed with Release No. 9249-26, publishing a notice of proposed rulemaking on event contracts involving enumerated activities. The proposal would amend Regulation 40.11 and add Appendix F to Part 40, creating a framework for evaluating whether contracts involving those categories are contrary to the public interest. The CFTC said the proposal responds to growth in event contracts listed by registered entities, including contracts referencing sporting events.
That rulemaking replaced, at least in practical focus, a more restrictive 2024 approach. In May 2024, the CFTC proposed amendments that would have treated event contracts involving political contests, awards contests, and athletic games as gaming contracts that could not be listed. The 2026 proposal instead describes a contract-by-contract review framework, including a 90-day review process and public-interest factors.
What else is New York doing now?
The legal pressure is no longer limited to the attorney general and the Gaming Commission. The Wall Street Journal reported on August 12 that New York City Council Speaker Julie Menin launched an investigation into Kalshi, Polymarket, Coinbase, and Gemini Titan over potential deceptive marketing and allegations involving minors. The report said the Council sought answers to more than 60 questions about operations, revenue, marketing, compliance, and user demographics.
The Council inquiry does not carry the same legal posture as the attorney general’s lawsuit, but it broadens the scrutiny of prediction-market marketing in the country’s largest city. It also puts Kalshi in the same New York policy frame as Polymarket, Coinbase, and Gemini Titan, even though the platforms operate under different structures and regulatory positions.
What happens next?
The next concrete milestones are judicial, not rhetorical. New York’s July 31 petition asks a state court to halt Kalshi’s alleged illegal gambling activity and impose monetary remedies, while the CFTC’s federal case asks the Southern District of New York to block state enforcement against registered contract markets. Any ruling on preliminary relief in those cases will shape whether New York can keep pressing gambling-law claims while the broader federal-preemption dispute moves toward appeal.
For prediction-market operators, the stakes are operational as much as legal. A state win would strengthen the argument that sports-linked event contracts must comply with state gambling regimes, including licensing, taxes, and age limits. A CFTC win would reinforce a national derivatives-law framework for registered exchanges. Until courts resolve that split, New York remains one of the central tests of whether sports event contracts are regulated as financial products, gambling products, or both.
