New York goes after Kalshi, claiming it offers illegal gambling

• Kalshi has faced more pressure in New York, following a lawsuit filed by the AG’s office and the governor
• The lawsuit reiterates a familiar argument, arguing that the company is offering illegal gambling and targeting vulnerable consumers
• At the same time, Kalshi is pushing back, arguing that its products constitute purely a form of financial trading, not gambling

New York’s stance towards prediction markets has been less friendly, and the state’s decision to go after Kalshi, the sector’s largest player, has further reaffirmed this.

New York state’s governor and AG go after Kalshi once again

Empire State Attorney General Letitia James has filed a lawsuit, together with New York Gov. Kathy Hochul, against the company, calling it "an illegal, unlicensed gambling operation." The lawsuit seeks to block it from operating in the state, as confirmed by the lawsuit filed in state Supreme Court in Manhattan.

Kalshi has released a statement in which it has criticized the legal move against its local operations, calling it a "political theater."

"States can’t 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," the company said in a statement.

In the meantime, the AG’s office has argued that the state’s laws were there to protect children from products such as betting as well as help tackle gambling addiction, and further argued that it didn’t mean what these companies called themselves.

"No 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."

Further to the demands to withdraw from the state, the AG is now also insisting that Kalshi must forfeit its "illegal gains" and pay restitution to customers in the state. The amount in the court filing is cited at $36bn.

This is not the first time elected officials and the private company have clashed. The argument runs on well-established, familiar reasoning.

On the one hand, the state argues that Kalshi’s sporting event contracts are a form of gambling as users trade on "uncertain outcomes," which is customary for traditional sports betting.

Prediction markets targeted time and again by officials, regulators

On the flipside, there is Kalshi, which stipulates that its offer is a financial product that is regulated under the Commodity Futures Trading Commission and cannot be subject to state gaming laws.

This is not the first time that New York has gone after prediction market platforms. In April, the state targeted Coinbase and Gemini.

Even before that, in October, the New York State Gaming Commission ordered Kalshi to stop offering its products locally, in what it also described as an "illegal offering."

Kalshi pushed back at the time by filing a federal lawsuit of its own. Kalshi has already faced several setbacks across the United States, with the company ordered to cease offering its contracts by August 12 in Nevada.

A Washington federal judge has also denied the company’s request for a preliminary injunction against a blocking order.

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