New York Escalates Against Kalshi With $36 Billion Claim as Federal Authority Intervenes

State Seeks Massive Penalties and Platform Shutdown

New York Attorney General Letitia James has moved to shut down Kalshi and extract a minimum of $36 billion in damages, arguing the prediction market operator is running an unlicensed gambling enterprise. The enforcement action, filed alongside a request for emergency restraint, levies eight separate violations against the platform, ranging from breaches of New York’s constitutional gambling protections to participation in bookmaking and unlicensed mobile sports wagering. Authorities contend the platform also violates the federal Wire Act.

The penalty structure James is pursuing would strip Kalshi of three times whatever gains it has accumulated, with an additional $100,000 sought for each sports wagering offer made to New York residents. Investigators documented compliance failures through test transactions, including bets placed on college sports involving New York teams—offerings that even state-licensed operators are prohibited from providing. The state also cited the platform’s practice of allowing account creation from users as young as 18, below New York’s established threshold of 21 for gaming.

Federal-State Authority Battle Escalates

The timing of New York’s action reveals an intensifying turf war. The U.S. Commodity Futures Trading Commission, asserting that federal law grants it exclusive authority over event contracts, sued New York in April on jurisdictional grounds. Just one day before New York filed its enforcement petition, the CFTC asked the court in that federal case to issue a restraining order preventing the state from prosecuting Kalshi or any CFTC-registered platform. New York proceeded with its enforcement regardless, sharpening the conflict between state consumer protection mandates and federal financial regulator priorities.

Governor Kathy Hochul framed the action as a consumer protection necessity, stating that Kalshi has disregarded established gaming law that exists to safeguard residents and fund public services. According to the petition, the state’s gaming laws require uniform application regardless of a company’s federal registration status.

Kalshi’s Courtroom Struggles Mount

The platform has faced mounting legal headwinds across multiple jurisdictions. A Southern District court denied Kalshi’s request for preliminary injunction relief on July 7, followed by a refusal to grant protection pending appeal on July 27. Michigan’s judiciary imposed restraints on the platform’s operations in June, and Washington state secured a preliminary injunction on July 20. Minnesota stands as Kalshi’s sole recent victory, with a federal judge blocking the state’s proposed ban on July 27—a ruling that hinged on whether event contracts qualify as swaps under federal commodity law.

The Third Circuit previously upheld an injunction protecting New Jersey’s enforcement authority, limiting Kalshi’s appellate success. These accumulating losses suggest regulatory hostility from state actors across the country, even as federal authorities contest state-level enforcement powers.

Source: New York Attorney General and CFTC, via Decrypt. Not financial advice.

Why it matters: The Kalshi enforcement battle illustrates the unresolved regulatory framework for crypto-adjacent prediction markets, with state and federal authorities claiming overlapping authority—a conflict likely to affect how crypto prediction platforms and event-contract platforms operate across the United States.