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New York’s lawsuit against prediction market operator Kalshi is shaping up as another high-profile clash over how states treat event-based trading platforms. Gov. Kathy Hochul and Attorney General Letitia James filed suit Friday in Manhattan Supreme Court, alleging Kalshi is operating an illegal gambling business in the state without a license.
The case matters beyond New York because Kalshi says it is a federally regulated exchange overseen by the U.S. Commodity Futures Trading Commission, while state officials argue New York gambling laws still apply.
Blakeman says New York walked away from a major revenue opportunity
Bruce Blakeman, a Republican candidate for governor, sharply criticized Hochul over the lawsuit and claimed the state could be giving up significant tax revenue.
According to the New York Post report, Blakeman said Hochul “left billions on the table” by not pursuing a deal with Kalshi. The report said Kalshi had offered New York an arrangement similar to one in North Carolina that included a 6% tax on prediction market trades. Citing a Wall Street Journal report, the article said that proposal could have generated $10 billion in tax revenue over five years.
Blakeman argued that money could have been used for tax cuts, police hiring, and education.
State and Kalshi offer very different views of the platform
New York officials framed the lawsuit as a consumer-protection and enforcement action. Hochul said Kalshi had chosen to ignore state gambling laws, which she said exist to protect consumers, prevent problematic gambling, and fund public services.
Her office pushed back on Blakeman’s criticism as well. Spokesperson Sean Butler said Kalshi “blatantly violated state law,” put consumers, including minors, at risk, and deprived New Yorkers of revenue tied to programs such as education.
Kalshi rejected that characterization. Co-founder and CEO Luana Lopes Lara said the company is regulated by the federal government through the CFTC, and spokesperson Elisabeth Diana called the lawsuit “political theater.”
Why prediction market users should watch this case
For players and market users, the core issue is whether platforms like Kalshi are treated primarily as federally supervised exchanges or as products subject to state gambling enforcement. That question has surfaced in other states as well, including Minnesota and Washington state, according to the report.
What happens next in Manhattan Supreme Court could help define how aggressively states challenge prediction markets, even as operators continue to argue they fall under federal oversight.
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Source: As reported by nypost.com.
