By Jonathan Stempel
NEW YORK, July 31 (Reuters) – New York’s attorney general sued Kalshi on Friday, claiming that its prediction market platform violates state laws against illegal gambling.
In a petition filed in a state court in Manhattan, Attorney General Letitia James said Kalshi failed to obtain a New York State Gaming Commission license to operate its platform, where people trade based on the predicted outcomes of events such as sports and elections.
The attorney general said such platforms can encourage problem gambling, including by people under age 21, and endanger people’s financial, emotional and physical health.
She filed similar petitions in April against two other prediction market operators, Coinbase Financial Markets and Gemini Titan.
“New York’s gambling laws protect children from underage betting and help combat gambling addiction,” James said in a statement. “No matter what they call themselves, prediction markets like Kalshi are gambling platforms, plain and simple.”
Kalshi and lawyers who represent the New York-based company did not immediately respond to requests for comment outside business hours.
Prediction markets such as Kalshi and Polymarket have soared in popularity since the 2024 U.S. presidential election, when they fared better than pollsters in predicting Republican Donald Trump’s victory over Democrat Kamala Harris.
Their growth has sparked a flurry of lawsuits and countersuits over the authority of individual U.S. states, rather than the federal government, to regulate the industry.
The U.S. Commodity Futures Trading Commission has claimed exclusive oversight, and challenged regulatory activity in at least nine states.
FEDERAL JUDGE REJECTED PREEMPTIVE KALSHI LAWSUIT
According to the petition, Kalshi’s platform offers what is “quintessentially gambling” because people can wager money on events whose outcomes they don’t control, such as who will win the Super Bowl or the reality TV show “Big Brother.”
New York also objected to Kalshi letting 18- to 20-year-olds use its platform, despite a minimum age of 21 under state law for mobile sports betting.
“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,” New York Governor Kathy Hochul said in a statement. “This choice has consequences.”
James sued two days after the federal appeals court in Manhattan rejected Kalshi’s request to avoid being subjected to New York’s gambling laws, while it appeals a judge’s refusal on July 8 to grant a preliminary injunction against the state.
Kalshi had preemptively sued New York last October to block enforcement.
U.S. District Judge Analisa Torres, however, found that the state’s interests in preventing gambling addiction, preserving the integrity of sports, and avoiding a proliferation of unregulated contracts “heavily” outweighed Kalshi’s interests in ensuring the primacy of federal law and avoiding “intractable” technology issues for customers.
At least four states — Massachusetts, Michigan, Nevada and Washington — have won court orders restricting Kalshi’s activities.
New York’s lawsuit against Kalshi seeks a halt to its alleged unlawful conduct, the forfeiture of illegal gains, civil fines equal to triple those gains, and restitution to customers.
(Reporting by Jonathan Stempel in New York; Editing by Lincoln Feast.)
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