New York has sued Kalshi, a prediction market company, alleging it operates an "illegal gambling operation" within the state. Attorney General Letitia James claims Kalshi's offerings are "quintessentially gambling" and expose New Yorkers, including those under 21, to addiction without proper safeguards.

Kalshi, along with competitor Polymarket, faces numerous lawsuits and insists their service is commodities trading, a position previously defended by the Donald Trump administration. A Kalshi spokesperson called the lawsuit "political theater," arguing that states cannot shut down federally licensed exchanges and that such actions would drive New Yorkers to offshore platforms.

The lawsuit seeks to permanently prohibit Kalshi from operating in New York unless it obtains a gaming license, and requests substantial financial penalties, potentially exceeding $36 billion. This legal action follows recent federal court losses for Kalshi, where judges ruled that New York can enforce its gambling laws on the company's sports-related offerings, despite federal regulation by the Commodity Futures Trading Commission (CFTC).

The CFTC itself has filed a lawsuit to prevent state "aggressive attempts" to regulate services under its jurisdiction, warning that allowing states to enforce gambling laws could "bring entire federally regulated markets to the brink of destruction." Similar disputes are ongoing across the country, with conflicting court rulings on the regulation of prediction markets.