New York Attorney General Letitia James officially sued Kalshi on Friday, July 31, 2026, seeking at least $36 billion in penalties and restitution. The state requested an immediate court injunction to halt Kalshi’s prediction market operations within its jurisdiction.
The core of the allegations centers on licensing. Kalshi is accused of offering event contracts related to sports, elections, and culture without obtaining a license from the New York State Gaming Commission. New York authorities firmly argued that the platform’s contracts fall entirely under the state’s legal definition of gambling, rather than federally regulated derivative products.
New York Governor Kathy Hochul spoke out. “Kalshi chose to ignore New York’s gambling laws,” she said. The lawsuit expands further, accusing Kalshi of allowing users under New York’s legal gambling age - 21 years old - onto the platform, as well as evading gambling taxes.
New York sought a temporary restraining order to immediately halt Kalshi’s event contracts. The $36 billion demand is calculated from user restitution, disgorgement of revenues, treble damages, and an additional penalty of $100,000 per offering.
An Increasingly Difficult Position
This pressure comes as Kalshi faces legal hurdles in court. On July 27, federal judge Analisa Torres denied Kalshi’s emergency injunction request while its appeal in the Second Circuit is pending. Torres also rejected short-term administrative relief from New York’s enforcement actions.
In her preliminary ruling on July 7, Torres signaled that the Commodity Exchange Act likely does not preempt New York gambling laws regarding Kalshi’s sports contracts.
However, US commodities regulators stepped in. The CFTC filed a separate temporary restraining order to prevent New York from prosecuting Kalshi and other CFTC-registered prediction market platforms.
One Country, Two Standards
In other jurisdictions, legal protection was instead granted to prediction platforms. In Minnesota, judge Katherine Menendez temporarily blocked the state’s prediction market ban before the rule took effect on August 1.
The stay issued by Judge Menendez has broader implications, as Polymarket US is also confirmed to fall within the scope of protection from local legal action.
The jurisdictional conflict between federal commodities regulators like the CFTC and state-level gambling enforcement has now become a central issue. This multi-billion-dollar legal battle will determine the ultimate fate; whether prediction markets can continue operating as derivative financial products, or will ultimately be struck down as gambling operations. Reported via crypto.news.
Disclaimer: This article is for informational and educational purposes only, not financial advice. Cryptocurrency assets are highly volatile and carry significant risk. Always do your own research (DYOR) and never invest more than you can afford to lose.
