New York sued Kalshi on Friday for running what Attorney General Letitia James calls an illegal, unlicensed gambling operation. The same conduct is currently the subject of a separate federal lawsuit, one in which Kalshi’s own regulator, the Commodity Futures Trading Commission is suing New York for interfering with it.
The petition, filed in state court in the County of New York, asks a judge to stop Kalshi from operating its prediction-market platform in the state, force it to forfeit its gains, and pay fines equal to three times whatever it made. The petition seeks to halt Kalshi’s operations in New York and impose penalties that could total as much as $36 billion.
What New York’s Petition Actually Alleges
James’s office argues Kalshi’s contracts meet the state’s legal test for gambling: the outcome is uncertain, and it’s outside the bettor’s control or turns on chance. Kalshi has never applied for a license from the New York State Gaming Commission, the same license that requires licensed casinos and mobile sportsbooks to pay into state gambling-tax revenue that funds schools, youth sports programs, and problem-gambling treatment. The petition also states Kalshi’s platform is open to users age 18 to 20, three years below the 21-year floor New York sets for mobile sports betting, a detail that’s easy to skip past in the topline “protects minors” framing but is a specific, checkable allegation in its own right.
“No matter what they call themselves, prediction markets like Kalshi are gambling platforms, plain and simple.”
– Attorney General Letitia James
The Regulator Suing the Regulator
New York’s theory runs directly against a position the CFTC has been litigating on Kalshi’s behalf since April, even as Talos integrates Kalshi prediction markets into its institutional trading platform, highlighting that institutional adoption has continued alongside the company’s legal battles. The CFTC sued New York in the Southern District of New York, naming Governor Hochul, James, and Gaming Commission officials directly, seeking a declaratory judgment that federal law preempts state gambling enforcement against CFTC-registered exchanges. It’s filed the identical suit against Arizona, Connecticut, Illinois, and Wisconsin, and has already won a temporary restraining order blocking Arizona’s criminal case against a CFTC-regulated platform.
That’s the agency’s position as a litigant, not just rhetoric: the CFTC and DOJ’s complaint states that without an injunction against New York, “the United States and the CFTC will suffer irreparable harm.” Chairman Michael Selig’s public comments track the same line:
“New York is the latest state to ignore federal law and decades of precedent by seeking to enforce state gambling laws against CFTC-registered exchanges.”
– CFTC Chairman Michael Selig
That’s worth separating from a personal aside: Selig’s quotes track the position the CFTC has actually filed in court, so here they represent the agency’s stated position, not every official comment does.
Five Losses in a Month
Today’s filing follows a month in which Kalshi lost the same procedural argument five separate times.
- July 7: U.S. District Judge Analisa Torres denied Kalshi’s preliminary injunction, ruling that the Commodity Exchange Act doesn’t preempt New York’s gambling law.
- Same day: Kalshi appealed to the Second Circuit.
- July 27: Kalshi went back to Torres for an emergency injunction pending that appeal, which was denied again.
- Kalshi then sought administrative relief directly from the Second Circuit.
- A single judge there, Myrna Perez, denied that too and referred the matter to a three-judge panel, which has since denied the motion as well, removing Kalshi’s last procedural block to New York taking action.
New York isn’t alone in restricting Kalshi’s sports-contract business: Massachusetts, Michigan, Nevada, and Washington have each already won court orders doing the same, even as Kalshi holds preliminary injunctions in its favor in New Jersey, affirmed by the Third Circuit in April, and in Tennessee. The CFTC, meanwhile, has pushed the opposite argument in nine states total.
The Panel Still Sitting on This
Nothing about Friday’s filing resolves the actual legal question: whether a CFTC-registered exchange’s sports contracts are federally protected derivatives or state-regulable gambling. That question now sits with the same three-judge Second Circuit panel that just denied Kalshi’s emergency motion, in a case where the agency meant to referee the dispute is instead one of the litigants.
Timeline
- April 2026: CFTC sues New York, seeking a declaratory judgment that federal law preempts state gambling enforcement against CFTC-registered exchanges.
- July 7, 2026: Judge Analisa Torres denies Kalshi’s preliminary injunction against New York’s gambling enforcement; Kalshi appeals to the Second Circuit same day.
- July 27, 2026: Torres denies Kalshi’s emergency injunction pending appeal.
- Late July 2026: Second Circuit Judge Myrna Perez denies administrative relief and refers the matter to a three-judge panel, which subsequently denies the motion.
- July 31, 2026: New York files its civil enforcement suit against Kalshi in state court.
FAQs
1. What is Kalshi accused of?
Operating an unlicensed gambling business in New York, in violation of state gambling law, according to the Attorney General’s petition.
2. Why is the CFTC suing New York over the same thing?
The CFTC argues federal law gives it exclusive jurisdiction over CFTC-registered exchanges like Kalshi, preempting state gambling enforcement, a position it’s also litigating against four other states.
3. What happens next?
The same Second Circuit panel that just denied Kalshi’s emergency motion still has to rule on the underlying appeal, which will address whether Kalshi’s contracts are federally protected derivatives or state-regulable gambling.
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