New York Democratic Governor Kathy Hochul and Attorney General Letitia James announced on Friday, July 31st, 2026, that the state is suing the prediction market Kalshi for "running an illegal gambling operation" despite Kalshi being a federally regulated exchange.

The state alleges Kalshi operated within New York without obtaining the necessary licenses from the state's Gaming Commission. Attorney General James is seeking a permanent ban on Kalshi's operations in New York until it secures all required licenses.

The lawsuit demands Kalshi identify each of its customers, provide an accounting of their itemized bets, the amounts lost, and the revenue Kalshi earned during its operations in New York. Should the state prevail, James seeks full restitution for all New York users of the platform and a penalty amounting to three times the revenue generated by Kalshi in the state.

Additionally, James is pursuing a penalty of $100,000 for each offering or attempt to offer sports gambling in New York by Kalshi, which totals at least $36 billion according to court filings.

James stated, "no matter what they call themselves, prediction markets like Kalshi are gambling platforms, plain and simple." Kalshi is reportedly seeking to move the suit to a potentially more favorable Manhattan federal court, as reported by The Wall Street Journal.

Governor Hochul framed the legal action as necessary to "protect consumers, prevent problematic gambling, deliver funding for critical public services, and ensure that every company plays by the same rules." However, critics suggest the move is aimed at extracting tax revenue from Kalshi and its users by casting the platform as an unregulated gambling operation.

Sources