New York vs. Kalshi: $36B Fight Over Prediction Markets

• New York sues Kalshi, seeks at least $36 billion in damages
• State requests to immediately halt Kalshi’s event contracts
• CFTC filed a rival motion to shield Kalshi from state enforcement
  

New York has sued prediction market platform Kalshi, accusing the company of operating an unlicensed gambling business and asking a court to block its activities in the state. 

The case has intensified a broader legal battle over whether prediction markets fall under state gambling laws or federal commodities regulation.

New York Takes Legal Action Against Kalshi

New York Attorney General Letitia James filed a lawsuit against Kalshi on July 31, 2026, alleging that Kalshi offered event contracts tied to sports, culture, and elections without obtaining required state approval.

The state argues that Kalshi’s contracts qualify as gambling because they involve uncertain outcomes that participants cannot control. 

The lawsuit alleges the company exposed New Yorkers, including residents under the state’s legal gambling age of 21, to potential financial harm.

New York is seeking a court order preventing Kalshi from operating in the state, along with financial penalties, restitution, and other remedies. 

The filing requests damages and penalties that could total at least $36 billion, although the final amount would depend on further court proceedings and a full accounting.

The state also requested a temporary restraining order to immediately suspend Kalshi’s relevant event contracts while the case moves forward.

CFTC Challenges State Authority

The federal Commodity Futures Trading Commission (CFTC), which regulates Kalshi as a registered entity, has filed a separate emergency motion seeking to block states from pursuing enforcement actions against federally regulated prediction market platforms.

The agency argues that the Commodity Exchange Act gives the CFTC authority over prediction markets and prevents states from applying their own gambling regulations to CFTC-registered entities.

The CFTC’s request comes as the court considers a broader dispute over whether states have the authority to restrict federally regulated prediction markets.

A Broader Battle Over Prediction Markets

Kalshi has faced regulatory challenges in several states, including temporary restrictions in Michigan and Washington, while Minnesota has taken a different approach after a judge blocked the state’s prediction-market restrictions from taking effect.

The dispute has placed Kalshi at the center of a growing conflict between federal and state regulators. The outcome could have consequences beyond Kalshi, potentially shaping the future of other prediction market platforms, including Polymarket and other blockchain-based markets operating under similar legal frameworks.

Kalshi remains the largest prediction market by trading volume, with $33 billion traded in June, compared with Polymarket’s $13.95 billion, according to The Block’s data.

The legal fight now moves toward a key question: whether prediction markets will primarily be governed by federal financial regulators or by state gambling authorities.

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