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The state of New York is suing prediction market Kalshi to stop it from operating in the state, arguing the platform amounts to unlicensed gambling.
On Friday, New York Governor Kathy Hochul and the state’s attorney general, Letitia James, announced the lawsuit, which also demands that the company pay fines, repay users, and forfeit the “illegal gains.”
“No matter what they call themselves, prediction markets like Kalshi are gambling platforms, plain and simple,” James said in the announcement.
The complaint, filed in New York’s Supreme Court, argues Kalshi has been engaging in illegal gambling since it never obtained a license from the state’s gaming commission. This also means Kalshi has been "sidestepping its obligation to pay taxes like licensed casinos and mobile sports gambling platforms do," it says.
The lawsuit challenges Kalshi’s framing as merely dealing in financial derivatives tied to the outcomes of public events; for example, the location of Taylor Swift’s wedding or when a US government shutdown will occur. New York’s lawsuit argues the activity “is quintessentially gambling: it allows a bettor to stake or risk money upon the outcome of a contest of chance or a future contingent event not under the bettor’s control or influence, upon an agreement or understanding that he will receive something of value in the event of a certain outcome."
If the state prevails, it could block off a major market for Kalshi and cause serious disruption, since the company is headquartered in Manhattan. However, Kalshi says the lawsuit ignores that the company received approval in 2020 from the federal Commodity Futures Trading Commission (CFTC) to operate as a “designated contract market,” thereby enabling it to trade in futures or options contracts.
“It's sad to see this type of political theater from the leadership in our own state,” Kalshi spokesperson Elisabeth Diana told PCMag. “States can’t just shut down a federally licensed exchange. This would also hurt New Yorkers, who would be driven offshore. We love New York, we love New Yorkers, and New Yorkers love our product.”
The CFTC is also moving to intervene, with Chairman Michael Selig tweeting: “Rather than seek reasoned answers from the courts, Letitia James and New York seek to force an unprecedented, sudden shutdown of prediction markets nationwide. The @CFTC has already sued to stop this and will continue to defend its jurisdiction.”
The Commission confirmed to PCMag that it filed for a temporary restraining order to block New York from taking any enforcement action.
Kalshi also claims New Yorkers have netted $200 million in profits on the platform, meaning the lawsuit risks clawing back those profits. (That said, the company itself noted there were 2.9 unprofitable users for each profitable one during a recent past month, according to the Wall Street Journal.)
Kalshi further claims it held negotiations with New York’s government, which included a proposed tax to generate billions in revenue for the state, but Kalshi says the discussions were ignored.
About Our Expert
I've been a journalist for over 15 years. I got my start as a schools and cities reporter in Kansas City and joined PCMag in 2017, where I cover satellite internet services, cybersecurity, PC hardware, and more. I'm currently based in San Francisco, but previously spent over five years in China, covering the country's technology sector.
Since 2020, I've covered the launch and explosive growth of SpaceX's Starlink satellite internet service, writing 600+ stories on availability and feature launches, but also the regulatory battles over the expansion of satellite constellations, fights with rival providers like AST SpaceMobile and Amazon, and the effort to expand into satellite-based mobile service. I've combed through FCC filings for the latest news and driven to remote corners of California to test Starlink's cellular service.
I also cover cyber threats, from ransomware gangs to the emergence of AI-based malware. In 2024 and 2025, the FTC forced Avast to pay consumers $16.5 million for secretly harvesting and selling their personal information to third-party clients, as revealed in my joint investigation with Motherboard.
I also cover the PC graphics card market. Pandemic-era shortages led me to camp out in front of a Best Buy to get an RTX 3000. I'm now following how the AI-driven memory shortage is impacting the entire consumer electronics market. I'm always eager to learn more, so please jump in the comments with feedback and send me tips.
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