New York sues Kalshi over alleged illegal betting operation, seeks $36 billion in damages

New York has filed a lawsuit against Kalshi, the prediction markets platform, accusing it of running an unlicensed gambling business. For PSPs and operators, the important part is not the headline label — it is the state’s view that event contracts can fall squarely under gambling rules, with licensing, taxes, age checks, and consumer protections attached.

1. Governor Kathy Hochul and Attorney General Letitia James announced the action against Kalshi, which lets users across the United States bet on sports, election, cultural, and other public event outcomes. New York says those contracts are, in substance, wagers.
2. The New York Attorney General’s office says its investigation found that Kalshi’s prediction markets meet the state’s legal definition of gambling because they involve uncertain outcomes that the bettor cannot control. The complaint says Kalshi operates without a license from the New York State Gaming Commission (NYSGC) and without paying the taxes required for that activity.
3. James said New York’s gambling laws are designed to protect minors and help combat gambling addiction, and that platforms like Kalshi are gambling sites whatever name they use. The state also argues that Kalshi admits users aged 18 to 20, while New York requires mobile sports betting customers to be at least 21.
4. New York is asking the court for an order blocking Kalshi from operating in the state, compensation for affected consumers, and monetary penalties equal to three times its profits. Daniel Wallach, a U.S. gaming and sports betting lawyer, said the Attorney General is seeking a total of $36 billion in damages.
5. The case follows a cease-and-desist order from the NYSGC in October 2025. After that order, Kalshi sued New York regulators over their event contract rules; earlier this month, U.S. District Judge Analisa Torres denied Kalshi’s request for a preliminary injunction, saying New York has the authority to apply its gaming regulations to the company.

The broader point for high-risk payment teams is straightforward: if a jurisdiction treats prediction markets as gambling, the merchant suddenly inherits the usual stack of requirements — licensing, age gating, tax treatment, and regulatory exposure — even if the product is marketed as something more elegant than a sportsbook.