State cracks down on event wagers
New York State has launched a sweeping legal offensive against Kalshi, the high-profile prediction market platform, alleging that it operates an unlicensed gambling business by offering event-based contracts on everything from sports to elections. The lawsuit, filed in the New York Supreme Court on Friday, seeks to halt Kalshi’s operations within state lines and demands at least $36 billion in damages—an amount calculated as three times the company’s alleged gains from its New York activity. In addition to this triple penalty, the state is seeking $100,000 for every instance where Kalshi offered unauthorized sports or mobile sports wagering to New Yorkers.
The petition was announced in a joint statement by Governor Kathy Hochul and Attorney General Letitia James, who have characterized Kalshi’s activities as “gambling, plain and simple.” Their action follows an October 2025 cease-and-desist order from the New York State Gaming Commission. Despite that warning, investigators were able to place test bets on Kalshi as recently as April—one wager involved a $1.14 contract on Connecticut beating Michigan, according to court filings.
Court documents show that test bets were placed by state investigators in April 2026, months after the cease-and-desist order.
College sports bets under fire
A key focus of the state’s case is Kalshi’s willingness to allow users between 18 and 20 years old to open accounts and place bets—a practice that directly violates New York law, which sets the minimum legal gambling age at 21. Moreover, Kalshi has reportedly listed betting markets involving New York college teams. Licensed sportsbooks in the state are explicitly barred from offering such markets due to longstanding concerns about integrity and athlete protection.
On paper, Kalshi presents itself as a regulated financial exchange overseen by federal authorities. In practice, New York alleges that it functions as an unlicensed sportsbook operating outside state restrictions.
The World Cup reportedly drove a surge of activity on Kalshi, adding three million users during the tournament period.
Federal regulator, state in jurisdiction clash
The legal battle has quickly escalated into a showdown between state and federal regulators. The Commodity Futures Trading Commission (CFTC), which supervises designated contract markets like Kalshi at the national level, intervened in April by filing its own lawsuit against New York. The CFTC argues that federal law grants it exclusive authority over event contracts—including those offered by Kalshi—and that state-level enforcement threatens this regulatory framework. On Thursday, the CFTC sought an emergency restraining order to block New York from taking further action against Kalshi or other federally registered platforms.
Kalshi itself responded by suing the New York State Gaming Commission last October after receiving the cease-and-desist letter. However, its efforts to secure relief in federal court have so far failed: A judge denied Kalshi’s request for a preliminary injunction on July 7 and refused protection pending appeal just weeks later on July 27. As of now, enforcement efforts remain active while appeals continue.
See Also
Restitution and penalties on the table
Beyond shutting down Kalshi’s operations in New York, officials are seeking restitution for users who may have been harmed or misled by what they describe as illegal gambling activities. They are also demanding disgorgement of all profits derived from these operations—potentially a staggering sum given that court documents cite Kalshi’s own figures of $178 billion in annualized trading volume and a company valuation of $22 billion.
Attorney General Letitia James filed her petition with eight separate counts against Kalshi and included a motion for a temporary restraining order aimed at freezing further activity immediately. According to decrypt.co, investigators placed multiple test bets themselves to demonstrate how easily underage users could access restricted markets—evidence that forms part of the state’s case file.
It remains uncertain how quickly courts will resolve this jurisdictional standoff or whether federal oversight will ultimately shield platforms like Kalshi from aggressive state-level enforcement actions.
The Big Picture
- •On Friday, New York sued Kalshi in Supreme Court, seeking at least $36 billion and $100,000 per unauthorized sports wager.
- •The lawsuit alleges Kalshi let users aged 18-20 bet and offered markets on New York college teams, both illegal in the state.
- •Kalshi was issued a cease-and-desist order in October 2025, but state investigators placed test bets on the platform in April 2026.
What remains to be seen
If the New York Supreme Court grants the state's motion for a temporary restraining order filed on Friday, Kalshi could be ordered to halt operations in New York immediately; whether the court will issue this order has not yet been confirmed.