San Francisco Frontiers - New York sues online prediction markets giant Kalshi

The suit alleges that Kalshi, one of the biggest such markets, exposes New Yorkers to "serious personal and financial risk."

The lawsuit asked the court to order Kalshi to halt its operation, make restitution to customers, forfeit all illegal gains and pay fines equal to triple those gains.

Online prediction markets have rapidly broken into the mainstream in the United States, positioning themselves as an alternative to both traditional polling and licensed sports betting.

But concern is spreading over allegations of corruption and insider trading based on everything from the top-secret operation to capture Venezuelan leader Nicolas Maduro in January to lucrative bets on the timing of US attacks and ceasefires with Iran.

President Donald Trump's longtime teleprompter operator, who had access to speeches ahead of time, is reportedly under investigation for using his knowledge to place bets on Kalshi.

Trump's son Don Jr is an adviser and investor at Kalshi's big rival Polymarket and his investment company bought a stake in the firm.

Such platforms remain illegal or unregulated in most countries outside the United States.

- 'Harming New Yorkers' -

New York-based Kalshi calls itself a federally regulated "event contracts" exchange rather than a traditional sportsbook, a distinction that has fuelled legal battles with state regulators.

Attorney General Letitia James said New York's gambling laws protect children from underage betting and help fight gambling addiction.

"No matter what they call themselves, prediction markets like Kalshi are gambling platforms, plain and simple," James said in a news release.

"By ignoring our laws, Kalshi is running an illegal operation and harming New Yorkers in the process."

New York Governor Kathy Hochul said Kalshi has "chosen to ignore New York's gaming laws... This choice has consequences."

Kalshi representative Elisabeth Diana said on Friday that the lawsuit would hurt New Yorkers, who would be "driven offshore."

"It's sad to see this type of political theater from the leadership in our own state. States can't just shut down a federally licensed exchange," she said in a statement.

Kalshi faces similar legal challenges in multiple US states where gaming regulators have issued cease-and-desist orders or filed suit accusing the platform of operating an unlicensed gambling business.

The company has argued that its activities are not gambling but something closer to market trading, using "event contracts" that let people trade on yes-or-no questions.

A.Evans--SFF