TLDR
- New York filed a lawsuit seeking at least $36 billion in damages, alleging Kalshi runs an unlicensed gambling platform.
- Kalshi moved the case to federal court, pausing New York’s request for an immediate injunction.
- CEO Tarek Mansour compared Kalshi’s structure to Nasdaq, saying it matches traders and charges fees.
- A federal judge already refused to block New York from enforcing gambling laws against Kalshi in July.
- The next step focuses on jurisdiction and whether state gambling rules can apply to a federally registered exchange.
Kalshi is facing a lawsuit from the state of New York that seeks at least $36 billion in damages, penalties, and other relief. The lawsuit was filed by Attorney General Letitia James on July 31.
New York claims Kalshi is running an unlicensed gambling operation. The state says the company lets people bet on outcomes they can’t control, which fits its legal definition of gambling.
Kalshi disagrees. The company describes itself as a prediction market that trades event contracts, not a sportsbook.
Hours after the lawsuit was filed, Kalshi moved the case from New York state court to federal court. This is known as removal, and it shifts where the case will be decided.
Case Moves to Federal Court
Because of the move, a New York judge treated the state’s request for an immediate injunction as moot. That means the request was set aside for now, not rejected on its merits.
Gaming law attorney Daniel Wallach said New York could refile that request if the case gets sent back to state court. Whether that happens depends on a decision about federal jurisdiction.
Kalshi argues that New York is trying to regulate a derivatives exchange that falls under the Commodity Futures Trading Commission, not state gambling law.
CEO Tarek Mansour spoke about the lawsuit during a CNBC interview on August 3. He said officials could take the same lawsuit and file it against Nasdaq, since both platforms match traders and collect transaction fees.
Mansour also compared the situation to past fights faced by companies like Uber and Airbnb. He framed the lawsuit as pushback from established gambling businesses facing new competition.
What New York Is Alleging
New York’s lawsuit says Kalshi offered event contracts on sports, elections, and entertainment without a required state gaming license. It also alleges that people between 18 and 20 years old could use the platform, even though the state’s minimum age for mobile sports betting is 21.
The state wants a permanent injunction, financial penalties, and an accounting of Kalshi’s customer activity. It is also seeking $100,000 for each unauthorized sports wagering offer.
These are allegations at this stage. No court has issued a final ruling on them.
Mansour said New York users have earned more than $200 million on Kalshi in 2026. He also said Kalshi proposed a plan that could generate close to $10 billion in state tax revenue over five years. Neither figure was backed by public data during the interview.
This isn’t Kalshi’s first legal setback in New York. On July 7, a federal judge refused to block the state from enforcing gambling laws against Kalshi’s sports contracts, saying the company hadn’t shown federal law overrides state rules.
Federal and state regulators remain split on the issue. The CFTC has argued in a separate case that it holds exclusive authority over contracts traded on registered exchanges.
Rulings in other states have gone different ways. A Washington judge sided with state gambling law, while a Minnesota judge temporarily blocked that state’s prediction market ban.
A federal judge will now decide whether New York’s case stays in federal court or gets sent back to state court, which will shape what happens next.
