NYS sues Kalshi, accusing it of running illegal, unlicensed gambling operation

New York has sued KalshiEX LLC, or Kalshi, after an investigation found it was running an illegal and unlicensed gambling operation through its prediction market platform, officials said.

In a joint statement early Friday, Gov. Kathy Hochul and Attorney General Letitia James said the investigation determined Kalshi had failed to obtain a license from the New York State Gaming Commission and avoided its obligation to pay taxes.

The platform also allows users ages 18 to 20 to gamble, although New York law requires a person to be at least 21 to participate in mobile sports betting, the statement said.

In the lawsuit, James asked the court to order Kalshi to forfeit all illegal gains, distribute restitution to consumers who were harmed and pay fines equal to three times the gains the company made through its illegal actions.

"New York’s gambling laws protect children from underage betting and help combat gambling addiction," James said in the statement. "No matter what they call themselves, prediction markets like Kalshi are gambling platforms, plain and simple. By ignoring our laws, Kalshi is running an illegal operation and harming New Yorkers in the process. We are taking them to court to uphold our laws and protect New Yorkers."

Kalshi, launched in 2021, gives users the opportunity to buy contracts on the outcomes of a wide range of future events.

Last year, Kalshi launched sports "trading," saying it offered legal markets, accessible in all 50 states, and encouraged users to trade on the outcomes of major sporting events.

Kalshi offers users the ability to trade on events including sports, elections, campaigns, the weather and cultural events such as award show winners on its website and app.

"Kalshi has chosen to ignore New York’s gaming laws, which exist to protect consumers, prevent problematic gambling, deliver funding for critical public services, and ensure that every company plays by the same rules," Hochul said in a statement.

The lawsuit seeks a total restitution to users who placed trades on the platform, a penalty of $100,000 for each offer or attempt to offer sports wagering or mobile sports wagering. The state also wants Kalshi to pay a penalty of three times the amount it has gained while allegedly operating in violation of New York law.

In statement to Newsday on Friday, Kalshi spokesperson Elisabeth Diana dismissed the state's claims. 

"It's sad to see this type of political theater from the leadership in our own state," Diana wrote. "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."

Newsday previously reported that Kalshi had sought to get around a state licensing requirement to offer sports betting in New York and had asked the U.S. District Court in Manhattan to throw out a "cease and desist" letter it received in October from the state gaming commission, which accused the company of operating an "unlicensed mobile sports wagering platform."

Earlier this month, a federal judge ruled Kalshi cannot offer sports betting in New York without a gaming license. 

In April, Hochul signed an order banning New York State employees from using insider information to profit from prediction markets, such as Kalshi and Polymarket.