A new state lawsuit accuses the prediction-market platform of operating without a license and letting minors trade. On a rival platform, traders are now betting on whether the Supreme Court will settle the underlying legal question once and for all.
New York's governor and attorney general have sued Kalshi, alleging the prediction-market platform operated as an unlicensed gambling business under state law. The suit claims Kalshi lacked a required license from the state's Gaming Commission, failed to pay gambling-operator taxes, and allowed users between 18 and 20 years old to trade despite New York's minimum gambling age of 21. The state is seeking an injunction halting Kalshi's unlicensed operation in New York, forfeiture of what it characterizes as illegal gains, restitution for affected consumers, and treble damages.
"No company is above the law," Governor Kathy Hochul said in announcing the suit. Attorney General Letitia James was more direct about the underlying legal theory: "Prediction markets like Kalshi are gambling platforms, plain and simple."
The New York action adds to a mounting legal challenge facing the prediction-markets industry. Kalshi already faces criminal charges in Arizona over alleged illegal election-betting, though a federal judge has since blocked Arizona's attorney general from pursuing that prosecution on constitutional grounds. More consequential for the industry's near-term trajectory is a late-August ruling from the Ninth Circuit Court of Appeals, which held unanimously that federal commodities law does not preempt state gaming law, a decision that directly conflicts with an earlier, contrary ruling from the Third Circuit.
That circuit split is now itself the subject of a prediction market. A Polymarket contract pricing the odds that the U.S. Supreme Court will agree to hear Kalshi's case has jumped to 52%, up sharply from 29% before the Ninth Circuit's ruling, on roughly $1 million in trading volume. A narrower, related contract prices just 6% odds that the Court accepts the case specifically before the end of October.
The stakes extend well beyond one company's legal bill. A Supreme Court review, and any eventual ruling on whether state gaming law can override federal commodities regulation, would settle a foundational legal question for every platform operating in this space, with direct implications for the exchanges, data providers and liquidity venues the broader prediction-markets industry depends on. For now, the New York suit adds a second live state action to a legal landscape that already includes a resolved circuit split working its way toward the country's highest court.