New York has filed a lawsuit against Kalshi, accusing the New York-headquartered company of operating an "illegal gambling operation" through its online prediction market platform. This action follows similar legal challenges from other states, including Nevada and Arizona, which also view Kalshi's services as gambling.

The lawsuit, spearheaded by New York Attorney General Letitia James, alleges that Kalshi’s platform facilitates betting on uncertain events without the necessary licenses from the New York State Gaming Commission. Furthermore, the state claims Kalshi has failed to pay taxes like traditional betting operators and has allowed individuals under 21 to participate, violating state laws designed to prevent underage betting and combat addiction.

"No matter what they call themselves, prediction markets like Kalshi are gambling platforms, plain and simple," stated James. The state seeks to compel Kalshi to forfeit illegal gains, provide restitution to harmed consumers, and pay fines equivalent to three times its illicit profits.

However, legal precedent is not entirely in New York's favor. A U.S. Circuit Court of Appeals previously overruled New Jersey's attempt to ban Kalshi. The Commodity Futures Trading Commission (CFTC), which regulates prediction markets, also disagrees with New York's stance. CFTC Chairman Mike Selig has criticized the lawsuit, suggesting it aims for an "unprecedented sudden shutdown of prediction markets nationwide" and asserting the CFTC will defend its jurisdiction.