New York has asked a Manhattan state court to permanently block prediction-market exchange Kalshi from offering what the state calls unlicensed sports wagering to New Yorkers, escalating a fight over whether federal commodities oversight shields the platform from state gambling laws.
A verified petition dated July 31 asks the court to order Kalshi to identify affected customers and itemize their wagers, losses and the company’s gains. The state also seeks customer restitution, damages, disgorgement, prejudgment interest and costs.
The most aggressive demands are a penalty equal to three times Kalshi’s alleged gains and $100,000 for each unauthorized offer or attempt to offer sports wagering or mobile sports wagering within or from New York.
Those remedies have only been requested. The court has not found Kalshi liable or awarded New York any money, and the petition provides neither an adjudicated gain figure nor a count of covered offers. That makes any aggregate estimate of Kalshi’s potential exposure speculative.
New York targets Kalshi’s operating model
Attorney General Letitia James brought the case under Executive Law Section 63(12), which allows the state to pursue alleged repeated or persistent illegality.
The petition advances eight theories. It alleges violations of New York’s constitutional gambling prohibition, three state Penal Law provisions, three Racing Law provisions and the federal Wire Act.
The filing also points to Kalshi’s scale, citing a $22 billion valuation and $178 billion in annualized transaction volume. Both numbers came from Kalshi’s May fundraising announcement; they are company-reported metrics, not audited findings by New York and not a measure of what the state could recover.
The case follows an October 2025 cease-and-desist demand from the New York State Gaming Commission over alleged unlicensed mobile sports wagering. Kalshi responded by suing state officials in federal court, arguing that its status as a federally regulated exchange preempts state enforcement.
On July 7, the U.S. District Court for the Southern District of New York denied Kalshi’s request for temporary and preliminary protection from state enforcement. The judge found that all four factors governing preliminary relief weighed against the company.
That ruling was an interim decision, not a final judgment on Kalshi’s preemption claims. Kalshi opened an interlocutory appeal in the Second Circuit on July 8, leaving the broader federal dispute unresolved while New York presses its separate state action.
Kalshi spokesperson Elisabeth Diana called New York’s lawsuit “political theater” and said in a statement reported by the Associated Press that states cannot shut down a federally licensed exchange. That is the company’s position; the state petition asks a court to reach the opposite practical result for Kalshi’s New York operations.
For now, Kalshi’s ability to keep serving New Yorkers is a contested legal question. The immediate risk is concrete: New York is seeking an order that would stop the activity, force a detailed accounting, and attach potentially large penalties to conduct the state alleges was unauthorized.