New York officials sued prediction market platform Kalshi for potentially billions of dollars on Friday, calling it an \u201cillegal, unlicensed gambling operation\u201d that includes sports wagering as the state seeks to halt its operations and force the company to forfeit its profits.<\/p>\n
New York joins a growing number of states filing lawsuits against Kalshi and other companies in a dispute with President Donald Trump’s administration over who regulates the\u00a0fast-growing prediction market. Kalshi and other platforms argue they are federally licensed and regulated, and states have no authority to govern them.<\/p>\n
\u201cIt\u2019s sad to see this type of political theater from the leadership in our own state,\u201d Elisabeth Diana, a spokesperson for New York-based Kalshi, said in a statement. \u201cStates can\u2019t just shut down a federally licensed exchange. This would also hurt New Yorkers, who would be driven offshore. We love New York, we love New Yorkers, and New Yorkers love our product.\u201d<\/p>\n
Prediction market platforms like Kalshi and Polymarket allow trading on the likelihood of a wide range of events such as sports, politics, news and even the weather.<\/p>\n
New York Gov. Kathy Hochul and Attorney General Letitia James, both Democrats, announced the lawsuit filed in state Supreme Court in Manhattan.<\/p>\n
\u201cNew York\u2019s gambling laws protect children from underage betting and help combat gambling addiction,\u201d James said in a statement. \u201cNo matter what they call themselves, prediction markets like Kalshi are gambling platforms, plain and simple. By ignoring our laws, Kalshi is running an illegal operation and harming New Yorkers in the process.\u201d<\/p>\n
James’ office is requesting that Kalshi be ordered to forfeit all illegal gains, pay restitution to consumers who were harmed and pay fines equal to three times the company’s gains. In a court filing, state officials provided a rough estimate of the damages and costs sought by the lawsuit \u2014 $36 billion.<\/p>\n
Kalshi had been in negotiations with New York officials in recent weeks over tax and consumer protection issues.<\/p>\n
In April, New York filed\u00a0a similar lawsuit\u00a0against prediction market platforms Coinbase and Gemini on illegal gambling operation allegations.<\/p>\n
State officials say the prediction markets meet the legal definition of gambling \u201cbecause the outcomes of the events on which its users are betting are uncertain and outside the control of the bettor or hinge on a game of chance.\u201d<\/p>\n
New York claims Kalshi has failed to obtain a license from the state Gaming Commission and skirted its obligation to pay taxes like licensed casinos and mobile sports gambling platforms do. The lawsuit also says prediction markets allow users ages 18 to 20, while New York requires mobile sports betting users to be at least 21.<\/p>\n
Last October, the Gaming Commission ordered Kalshi to stop what it called the \u201cillegal operating\u201d of an \u201cunlicensed mobile sports wagering platform\u201d in New York. Kalshi responded days later by filing a federal lawsuit against the commission and its members \u2014 legal action that remains pending.<\/p>\n
Prediction market platforms say they operate differently than gambling operations, because consumers are trading against other consumers \u2014 much like how stock markets work. Prices are based on trading, and the platforms only take a fee from the trading, they say.<\/p>\n
The platforms also argue federal law gives the U.S. Commodity Futures Trading Commission exclusive jurisdiction to regulate transactions offered in the prediction market. In February, Trump\u2019s appointee atop the federal commission\u00a0declared\u00a0that the agency \u201cwill no longer sit idly by\u201d while states aim to regulate or ban prediction markets and \u201cundermine the agency\u2019s exclusive jurisdiction.\u201d<\/p>\n
States counter that the vast majority of the business on prediction market platforms is sports betting, which they are empowered to regulate, and that is completely different from the commodities and futures contracts that the commission regulates.<\/p>\n
On Monday, a federal judge\u00a0temporarily blocked\u00a0Minnesota\u2019s first-in-the-nation law banning prediction markets just days before it was to take effect \u2014 dealing a setback for states trying to outlaw or regulate the platforms. In April, another federal judge ordered\u00a0a similar temporary halt\u00a0to Arizona’s efforts to enforce its gambling laws against prediction markets.<\/p>\n
A tangle of lawsuits is growing, as states try to use their gambling laws to shut down Kalshi, Polymarket and other prediction market operators. In April alone, the\u00a0federal government sued\u00a0Connecticut, Arizona and Illinois, challenging their efforts to regulate the industry.<\/p>\n
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