The state of New York has filed a major lawsuit against prediction market platform Kalshi, accusing the company of operating an unlicensed gambling business within the state. The suit, initiated by New York Attorney General Letitia James on July 31, was filed in the New York County Supreme Court and seeks at least $36 billion in damages, restitution, and penalties.

The legal action follows a recent federal court decision that declined to issue an injunction blocking New York's gambling laws from applying to Kalshi's operations, underscoring the broader legal fight over whether event contracts should be treated as regulated financial products or as gambling under state law.

Unlicensed Event Contracts at Issue

According to the complaint, Kalshi offered event contracts covering sports, elections, and cultural events without obtaining the required gambling license from the state. The platform allowed users to wager on the outcomes of real-world events, which the state argues makes these contracts comparable to sports betting and therefore subject to New York's gambling statutes.

BREAKING: New York State has sued Kalshi in New York County Supreme Court for running an illegal gambling operation in New York through its prediction market platform, seeks restitution, disgorgement, civil penalties, damages, and preliminary and permanent injunctive relief. pic.twitter.com/smfK9byGNT — Daniel Wallach (@WALLACHLEGAL) July 31, 2026

https://x.com/WALLACHLEGAL/status/2083048123962634707

The state is seeking a court injunction that would prohibit Kalshi from offering such contracts in New York until the matter is fully adjudicated. Additionally, New York is pursuing consumer restitution, disgorgement of profits, and punitive damages.

Penalties Could Reach Record Levels

The financial penalties demanded in the lawsuit are substantial. New York is seeking treble damages — three times the revenue Kalshi earned from the contested contracts — along with fines of $100,000 for each individual prohibited transaction. Authorities estimate that total damages could reach a minimum of $36 billion based on a comprehensive review of Kalshi's operations within the state.

If upheld, the penalty would rank as the largest ever imposed on a prediction market platform.

Licensing and Age Verification Concerns

New York contends that Kalshi's contracts constitute gambling, as users stake money on uncertain outcomes tied to sporting events and other public activities. The state emphasizes that Kalshi does not hold a license to conduct mobile sports betting in New York.

The complaint also raises concerns about age restrictions. While New York law requires participants in mobile sports betting to be at least 21 years old, authorities allege that Kalshi has made its services available to individuals aged 18 to 20.

Meanwhile, the Commodity Futures Trading Commission (CFTC) maintains that federally regulated event contracts fall under its jurisdiction rather than state gambling laws. That federal-state split is central to the case, which could help clarify how prediction market products are treated when they intersect with traditional gambling rules.

The case was filed at the New York County Supreme Court. The official press release from the New York Attorney General's office is available at ag.ny.gov.