Written by Yohan Yunstaff editorReviewed by Bryan O’Sheastaff editor

Written by Yohan Yunstaff editor

Reviewed by Bryan O’Sheastaff editor

New York sues Kalshi over alleged illegal gambling operation

Latest NewsPublishedJul 31, 2026

New York Takes on Kalshi Over Alleged Illegal Gambling Operation

The state of New York has filed a lawsuit against prediction market platform Kalshi, accusing it of running an unlicensed and illegal gambling business. This move is part of a growing dispute between New York and the Commodity Futures Trading Commission (CFTC) over whether federally regulated prediction markets fall under state gambling laws. For everyday people, this matter is significant because it raises questions about the regulation of online platforms that offer betting on various outcomes, including sports and elections.

Kalshi allows users to buy and sell contracts tied to the outcome of future events, with prices reflecting the market’s estimate of the probability that an event will occur. However, New York Attorney General Letitia James views such platforms as gambling platforms, stating, “No matter what they call themselves, prediction markets like Kalshi are gambling platforms, plain and simple.” The lawsuit seeks to halt Kalshi’s alleged illegal activities, require the company to forfeit its gains, and pay restitution to users and civil penalties.

Regulatory Dispute Escalates

The lawsuit is the latest development in an escalating jurisdictional dispute between New York and the CFTC. The CFTC argues that it has the exclusive authority to regulate designated contract markets like Kalshi, while New York claims the right to enforce its own gambling laws. This dispute has implications for the broader prediction market sector, which has grown in popularity alongside major sporting events. For instance, blockchain-based prediction markets processed about $20 billion in trading tied to the 2026 FIFA World Cup, with over 400,000 wallets participating.

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CFTC defends federal oversight of prediction markets

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Just before New York filed its case, the Commodity Futures Trading Commission (CFTC) filed an emergency motion seeking to block New York’s enforcement efforts, arguing that the state’s actions interfere with the agency’s exclusive authority under the Commodity Exchange Act to regulate designated contract markets like Kalshi.

Related: CFTC issues second warning to prediction markets on cookie-cutter self-certifications

The CFTC has taken similar positions in disputes involving at least nine states, arguing that allowing states to prohibit event contracts listed by federally regulated exchanges would create conflicting state rules and undermine federal commodities regulation.

Prediction markets continue to gain mainstream traction

Prediction markets allow users to buy and sell contracts tied to the outcome of future events, with prices reflecting the market’s estimate of the probability that an event will occur.

Kalshi’s rival, Polymarket, has also faced regulatory scrutiny, with several countries restricting or investigating its operations over gambling and licensing concerns.

Kalshi began expanding into blockchain-based infrastructure in December 2025, launching tokenized prediction markets on Solana and later adding support for multiple blockchain networks.

The broader prediction market sector has also grown alongside major sporting events.

According to analytics firm Chainalysis, blockchain-based prediction markets processed about $20 billion in trading tied to the 2026 FIFA World Cup, with more than 400,000 wallets participating.

Magazine: The 100x obsession: Fundamentals grow in importance as crypto matures

Cointelegraph is committed to independent, transparent journalism. This news article is produced in accordance with Cointelegraph’s Editorial Policy and aims to provide accurate and timely information. Readers are encouraged to verify information independently.

• Kalshi
• New York
• New York State
• Prediction Markets
• CFTC
• Polymarket
• Law
• Regulation

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