New York sues Kalshi, calls prediction markets 'illegal gambling'

New York is suing prediction market platform Kalshi, labeling its operations as an "illegal, unlicensed gambling operation." The state aims to shut down the company and seize its profits. This legal action places New York alongside other states challenging Kalshi and similar platforms, which claim federal licensing and regulation exempt them from state oversight.

In its lawsuit, filed in a Manhattan state court, Attorney General Letitia James argued that Kalshi failed to secure a license from the New York State Gaming Commission. She stated that such platforms can foster problem gambling, particularly among individuals under 21, and negatively impact people's financial, emotional, and physical well-being. The attorney general's office is seeking Kalshi's illegal gains, restitution for harmed consumers, and fines equivalent to three times the company's profits.

James has pursued similar actions against other prediction market operators, Coinbase Financial Markets and Gemini Titan, in April. She characterized their "event contracts" as "quintessentially" gambling. "No matter what they call themselves, prediction markets like Kalshi are gambling platforms, plain and simple," James stated, emphasizing that New York's gambling laws are designed to protect minors and combat addiction.

Prediction markets like Kalshi and Polymarket have gained significant traction, notably after accurately predicting Donald Trump's victory in the 2024 US presidential election, outperforming traditional pollsters. However, the US Commodity Futures Trading Commission (CFTC) asserts exclusive jurisdiction over these markets. The CFTC has challenged regulatory actions in at least nine states, including New York, which it sued in April. States, however, maintain that the majority of the business involves sports betting, which falls under their regulatory purview, distinguishing it from the commodities and futures contracts regulated by the CFTC. The CFTC filed an "emergency" motion to prevent New York from enforcing its state gambling laws against Kalshi, deeming it an "overreach" that would cause irreparable harm.

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No matter what they call themselves, prediction markets like Kalshi are gambling platforms, plain and simple.