The legal battle against the fast-growing prediction markets sector continues to heat up. On Friday, New York became the latest state to put a halt to the markets, filing a petition that accuses industry leader Kalshi of operating an unlicensed gambling platform.
The state alleges that Kalshi, which operates one of the most successful prediction markets in the country, facilitates illegal wagering on sports, elections, and culture without a proper license from the New York State Gaming Commission. It is asking the court to impose civil penalties of $100,000 for each unauthorized sports‑betting offer, which the filing estimates could total about $36 billion.
The petition comes at a time when Kalshi is growing rapidly. In May, the company said its annualized trading volume had tripled in six months to $178 billion, and it raised $1 billion at a $22 billion valuation. It is now reportedly eyeing another round that could push its valuation close to $40 billion.
Friday’s petition comes nine months after Kalshi sued New York’s gaming regulator in federal court. In that case, Kalshi first asked for a temporary restraining order and preliminary injunction to stop New York from enforcing its gambling laws against the company, but the court denied the request in July. Later that same month, Kalshi sought an emergency injunction pending appeal, but that request was also denied.
New York’s leverage
As more states move to rein in prediction markets within their borders, Friday’s petition lands in the middle of a growing showdown with the Commodity Futures Trading Commission.
Under Chairman Michael Selig, the federal agency dropped its earlier plan to ban political and sports event contracts and instead moved to treat prediction markets as federally regulated derivatives. The agency is asserting exclusive authority over event contracts on exchanges like Kalshi, backing them in clashes with state regulators and focusing on insider trading and fraud rather than treating these platforms as gambling operations to be shut down.
Following the news, Selig said in a social media post that the CFTC has filed its own lawsuit to block New York’s petition and will keep fighting to defend federal jurisdiction over prediction markets.
Prediction market and legal expert Daniel Wallach of Wallach Legal said New York’s case poses serious risk to Kalshi, in part because the company is headquartered in New York and subject to unusually broad enforcement powers in that state.
“It’s the one jurisdiction that vests the New York State attorney general with nationwide disgorgement powers … [and] allows the attorney general to claw back ill-gotten gains associated with that illegally operating business from wherever the transaction occurs,” Wallach said.
Wallach also noted that states fare better against Kalshi when they fight on their own turf, rather than letting cases revolve around federal law arguments. He pointed to the State of Washington’s recent win, where it secured a court order blocking Kalshi from offering its event contracts there. Nevada, Michigan, and Massachusetts have achieved similar results in their own courts.
Wallach also referred to the $36 billion figure as a “very conservative estimate” of how much Kalshi could be on the hook for in the New York case, given that the attorney general could also use a state law to go after money tied to trades all over the country. He described this possibility as an “existential threat” to Kalshi: “$36 billion is more than the reported value of the company, and this is not a hyperbolic number,” he said.