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New York has sued prediction market operator Kalshi, alleging the company is running an illegal gambling business in the state.
According to the Wall Street Journal, New York Attorney General Letitia James filed the suit Friday after talks between the state and Kalshi broke down. The attorney general’s office is asking the court to bar Kalshi from operating in New York without a gambling license and to require the company to forfeit its gains.
The Journal reported that the potential penalties and disgorgement could reach as much as $36 billion if New York prevails.
Kalshi had spent weeks trying to avoid the lawsuit, according to a person familiar with the matter cited by the Journal. Starting around early July, the company proposed several framework agreements that would have bound it to existing customer-protection laws in the state.
Gov. Kathy Hochul said in a statement that Kalshi had “chosen to ignore New York’s gaming laws.”
The case is another significant legal challenge for the prediction market sector, which has faced growing scrutiny over whether certain products should be treated as regulated gambling at the state level. The Journal also reported that James previously sued Coinbase and Gemini earlier this year over offering prediction markets.
For players, the immediate takeaway is that New York is seeking to stop Kalshi from operating there unless it has a gambling license. The lawsuit could also test how state officials and courts classify prediction market products under gambling law, though the court’s ruling and the specific products at issue were not detailed in the report.
What happens next will depend on the court process in New York and whether the state succeeds in its request to block Kalshi’s operations there and recover alleged gains.
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Source: As reported by Kevin T. Dugan; Katherine Long.
