New York Sues Kalshi for Illegal Gambling Operation

New York state has filed a lawsuit against prediction market operator Kalshi, accusing it of running an illegal gambling operation without a proper license and allowing underage users to participate.

The lawsuit, announced on July 31, 2026, by Governor Kathy Hochul and Attorney General Letitia James, aims to stop Kalshi’s operations within New York. The state demands that Kalshi forfeit its profits, pay fines amounting to three times those profits, and provide restitution to consumers harmed by its activities.

Kalshi operates prediction markets where users trade contracts based on uncertain future events, including sports outcomes. However, New York authorities classify these markets as gambling since participants wager on events they cannot influence. The company is accused of operating without a license from the New York State Gaming Commission, which means it has avoided paying taxes that fund public services such as schools, youth sports programs, and problem gambling prevention initiatives.

The lawsuit also highlights Kalshi’s allowance of users aged 18 to 20 to participate, despite New York law requiring bettors to be at least 21 years old for mobile sports betting. This raises concerns about underage gambling exposure and potential harm to younger consumers.

Governor Hochul stressed the importance of regulatory compliance and consumer protection, stating, “This choice has consequences … no company is above the law.” Attorney General James added that New York’s gambling laws protect children and help combat gambling addiction, and that Kalshi’s unlicensed operation undermines these protections.

Kalshi responded by calling the lawsuit “political theater” and argued that as a federally licensed exchange regulated by the Commodity Futures Trading Commission (CFTC), it is not subject to state gambling laws. The company warned that shutting down its platform could push New Yorkers to unregulated offshore sites, which may carry higher risks for consumers.

This legal dispute reflects ongoing tensions between state regulators and prediction market platforms over jurisdiction and consumer safeguards. Players using Kalshi or similar platforms should be aware of the potential legal uncertainties and risks involved, including the lack of state oversight and protections.

Consumers should also note that revenue from regulated gambling supports public programs and responsible gambling initiatives, which unlicensed operators do not contribute to. This case highlights the importance of using licensed platforms that comply with local laws and age restrictions. For more on player protection, see our Player Protection coverage.

For bettors in New York and beyond, this lawsuit may affect access to prediction markets and could lead to increased regulatory scrutiny of similar platforms. It also serves as a reminder to verify the licensing status and legal standing of any gambling-related service before participating. Learn more about the regulatory environment in the Regulation section.

Further developments are expected as the case proceeds, with potential implications for how prediction markets are regulated and how player protections are enforced across the US.

Read the original report at The Guardian and additional analysis at iGB.

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Priya Patel

Priya Patel covers regulation, licensing, enforcement, legal developments, and public policy across gambling markets. Her reporting emphasizes source attribution, chronology, and regulatory context.