On July 31, New York took legal action against KalshiEX, LLC, pushing a Manhattan court to halt the prediction market operator's activities. The state seeks to recover all profits Kalshi made in New York, plus triple those earnings, and impose an additional $100,000 fine for each unauthorized sports betting offer.
Governor Kathy Hochul and Attorney General Letitia James led the charge, arguing that Kalshi’s contracts are essentially gambling disguised under another name. The lawsuit claims users risk their money on uncertain events without any control, fitting the legal definition of gambling. James emphasized that regardless of how Kalshi brands itself, it operates as a gambling platform.
New York’s Gambling Tax and Federal Arguments
The complaint highlights Kalshi’s failure to obtain a license from the New York State Gaming Commission, thus dodging the roughly 51% tax that licensed sportsbooks must pay. Those funds typically support schools and gambling addiction programs. Kalshi’s own figures cited in the petition reveal a $22 billion valuation and $178 billion in annualized transaction volume, underscoring the scale of their operation. The suit also involves the federal Interstate Wire Act, countering Kalshi’s defense that its CFTC registration exempts it from state gambling laws.
Officials reportedly used the platform themselves during the investigation, placing bets from New York accounts to demonstrate its gambling nature. This case marks a significant escalation in how regulators are scrutinizing crypto-based prediction markets amid questions over their legal status and regulatory oversight.
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