In July 31, New York Attorney General Letitia James, announcing alongside Governor Kathy Hochul, sued Kalshi in state court in Manhattan, calling the federally licensed exchange an illegal, unlicensed gambling operation. The remedies stack up to a number designed for headlines: restitution, disgorgement, treble gains, and $100,000 per unlawful offering, which Reason tallied to at least $36 billion. “No matter what they call themselves, prediction markets like Kalshi are gambling platforms, plain and simple,” James said.
The case, brought by Attorney General Letitia James, escalates a rapidly expanding battle, including a flurry of lawsuits and countersuits, over whether individual U.S. states or the federal government should regulate the fast-growing prediction markets industry.
Four days earlier, on July 27, federal judge Katherine Menendez enjoined Minnesota from enforcing the first state law that would have made operating a prediction market a felony, days before it took effect. The plaintiffs were Kalshi, Polymarket’s US exchange, and, remarkably, the United States and the CFTC themselves, arguing the Commodity Exchange Act gives federal regulators exclusive jurisdiction over trades on designated contract markets. Kalshi reported more than 90,000 verified users in Minnesota with millions in open positions.
Same product, same week, opposite outcomes. American gambling policy is being rewritten by venue, one courtroom at a time, and the two biggest questions in US payments-adjacent regulation this year, who regulates event contracts and who collects the tax on sports risk, will be answered by whichever appellate court gets there first.
PROMOTED
The New York complaint is built to wound, and its details travel beyond the penalty math. The state alleges Kalshi let 18-to-20-year-olds trade sports outcomes in a state that sets mobile wagering at 21, and Hochul’s framing aimed at the consumer-protection center: Kalshi “has chosen to ignore New York’s gaming laws, which exist to protect consumers.” Gaming lawyer Daniel Wallach suggested the reported $36 billion may actually be understated. Kalshi’s counsel will note the number exceeds the entire US gaming industry’s annual revenue, which is presumably the point. Complaints like this are not drafted to be collected. They are drafted to force a federal question.
The scoreboard is genuinely split
The litigation map defies summary judgment in every sense. Kalshi won preliminary injunctions against Nevada and New Jersey in April 2025, with the New Jersey win affirmed by the third circuit this April, two to one, the first federal appellate ruling that sports event contracts fit the CEA’s definition of swaps under exclusive CFTC jurisdiction. It lost in Maryland, where a judge invoked the strong presumption against preemption in fields states traditionally occupy. Massachusetts won an injunction for the state in January. Ohio denied Kalshi in March. In Nevada, the same judge who granted Kalshi’s injunction reversed course in November, ruling sports contracts are not swaps at all.
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