By Hank Russell
Governor Kathy Hochul and Attorney General Letitia James have filed a lawsuit against KalshiEX, LLC for running an illegal gambling operation in New York through its prediction market platform.
Founded in 2018, according to its website, Kalshi is the first Commodity Futures Trading Commission (CFTC)-regulated exchange dedicated to trading on the outcome of future events in government, sports and entertainment. The platform allows people to trade on a broad range of topics.
In 2020, Kalshi became the first fully regulated financial exchange in the U.S. specifically for event contracts. The platform has been funded by various financial institutions, including Sequoia Capital, SV Angel and Charles Schwab.
An investigation by the Office of the Attorney General (OAG) found that Kalshi’s prediction market is an illegal, unlicensed gambling operation. Kalshi’s illegal prediction market exposes New Yorkers – including those under the legal gambling age of 21 – to serious personal and financial risk. The lawsuit is seeking a court order stopping Kalshi from operating as an unlicensed gambling business and requiring the company to pay fines, forfeit all illegal gains, and pay restitution to users.
The lawsuit alleges that Kalshi’s prediction markets meet the legal definition of gambling because the outcomes of the events on which its users are betting are uncertain and outside the control of the bettor or hinge on a game of chance. Despite this, Kalshi has failed to obtain a license from the New York State Gaming Commission, sidestepping its obligation to pay taxes like licensed casinos and mobile sports gambling platforms do. This tax revenue from gambling regulation funds public schools, sports programs for underserved youth, and problem gambling education and treatment.
Kalshi’s prediction markets are also available to users between the ages of 18 and 20, even though New York law requires a person to be at least 21 years old to participate in mobile sports betting, according to the state. Recent research has shown that, James and Hochul said, gambling among young people is associated with psychological distress, financial difficulties, and increased risk of gambling-related harms in adulthood.
In the lawsuit filed in New York State Supreme Court on July 31, OAG is asking the court to order Kalshi to forfeit all illegal gains, distribute restitution to consumers who were harmed, and pay fines equal to three times the gains the company made through its illegal actions.
“Kalshi has chosen to ignore New York’s gaming laws, which exist to protect consumers, prevent problematic gambling, deliver funding for critical public services, and ensure that every company plays by the same rules,” Hochul said. “This choice has consequences, and working closely with Attorney General James, New York is taking action to stop this illegal behavior and bring Kalshi into compliance, because no company is above the law.”
“New York’s gambling laws protect children from underage betting and help combat gambling addiction,” said James. “No matter what they call themselves, prediction markets like Kalshi are gambling platforms, plain and simple. By ignoring our laws, Kalshi is running an illegal operation and harming New Yorkers in the process. We are taking them to court to uphold our laws and protect New Yorkers.”
Long Island Life & Politics reached out to Kalshi for comment and is waiting to hear back.
James is urging New Yorkers to ensure gambling platforms are registered with the New York State Gaming Commission and report any misconduct or gaming fraud to OAG by filing a complaint online, which can be done anonymously or by calling 1-800-771-7755.