New York Attorney General Letitia James sued the prediction market Kalshi on Friday, alleging in a state court complaint that the company runs an unlicensed gambling business in New York and exposes residents, including minors, to gambling harm without the safeguards a licensed sportsbook must carry.
"No matter what they call themselves, prediction markets like Kalshi are gambling platforms, plain and simple," James said, according to ESPN. The complaint asks for restitution to customers, three times the company's alleged illegal gains, and $100,000 for each unlicensed sports wager, a sum the attorney general's office estimates at a minimum of $36 billion pending a full accounting. None of it is proven; these are allegations at the opening of a case.
Kalshi rejected the suit as "political theater" and said that "States can't just shut down a federally licensed exchange," ESPN reported.
What is actually being argued
Kalshi is a designated contract market registered with the Commodity Futures Trading Commission, the federal regulator for futures and derivatives. Users trade yes-or-no contracts on the outcome of future events, and in recent years those events have increasingly included sports results. The company's position is that these are financial contracts under exclusive federal jurisdiction. The states' position is that a contract paying out on who wins a football game is a bet, whatever the trading venue calls it, and that a state may license and tax bets placed within its borders.
The CFTC does claim broad authority over what happens on these venues. In a February advisory, the agency said it retains "full authority to police illegal trading practices occurring on any DCM," including insider trading, wash sales and fraud, and described two Kalshi cases: a political candidate who traded on his own candidacy, and a YouTube channel editor who traded on unreleased information about upcoming videos. Kalshi penalized and suspended both, for five years and two years respectively. That advisory is about market integrity, not about whether states may regulate the same activity as gambling. That question is unresolved.
A fight in a dozen states
New York's action is one of at least 20 suits Kalshi faces from state regulators, tribes and individuals, according to ESPN. The results so far are mixed and often contradictory.
Kalshi is not operating in Michigan, where an Ingham County judge ordered a temporary shutdown after the state argued it needed a Michigan Gaming Control Board license, or in Nevada, where a district judge issued an injunction, CBS Sports reported in its state-by-state tracker. Massachusetts obtained an injunction against sports event contracts while leaving other markets running. Ohio's Casino Control Commission fined the company $5 million, saying it evaded the state's 20 percent sports betting tax. Minnesota became the first state to enact an outright ban on prediction markets, signed on May 18 and effective August 1, though a federal judge has blocked it from being enforced.
Federal courts have gone the other way in several places. In Tennessee, the CFTC won a federal injunction blocking state enforcement, and this week the agency filed suit against New York itself. A Wisconsin judge declined to grant the CFTC an injunction, letting the state proceed under its gambling laws. A federal appeals court heard arguments in the Ohio and Tennessee cases on Thursday.
The California angle
California has its own version of this fight, and it runs through tribal gaming rather than a state lawsuit. Kalshi operates in the state, though with sports contracts contested. Three California tribes argue in litigation that prediction markets violate the Indian Gaming Regulatory Act, the 1988 federal law under which tribes hold exclusive rights to most casino-style gaming in the state, according to the CBS Sports tracker. Wisconsin's Ho-Chunk Nation has filed a comparable federal suit, saying the platforms threaten gaming authorized on tribal land.
That is the harder question for the industry. California voters rejected legal sports betting at the ballot in 2022, and the state's tribes have spent decades defending the exclusivity that outcome preserved. If sports event contracts are financial instruments beyond state reach, they would also sit outside the compacts that structure tribal gaming, which is precisely what the tribes are asking a federal court to prevent.
None of these cases has settled the core question, and the appeals now moving through the federal circuits suggest it will be answered well above the state courts where it started.
