(NEW YORK) -- New York sued Kalshi on Friday, alleging its prediction market is nothing more than illegal, unlicensed gambling, in large part because outcomes depend more on chance than skill.
The lawsuit does not seek to close down Kalshi, but, if successful, it could dent its ability to operate.
Kalshi insists its event contracts are federally regulated derivatives outside the scope of state gaming laws but New York Attorney General Letitia James’ lawsuit said Kalshi is merely seeking “to avoid the legal and financial consequences of New York’s close regulation of gambling by offering what is quintessentially wagering.”
"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," Elisabeth Diana, Kalshi's Head of Communications told ABC News. "This would also hurt New Yorkers, who would be driven offshore. We love New York, we love New Yorkers, and New Yorkers love our product."
The lawsuit alleged Kalshi violates state laws prohibiting wagering on games involving New York college teams and all sports betting for those under 21.
The Commodity Futures Trading Commission, which has said prediction markets are its exclusive purview, filed for a temporary restraining order to halt the state’s lawsuit.
“New York’s gambling laws protect children from underage betting and help combat gambling addiction,” James said in a statement. “No matter what they call themselves, prediction makers like Kalshi are gambling platforms, plain and simple.”
The lawsuit sought a court order demanding Kalshi submit to state regulators and taxes, to forfeit illegal profits and pay restitution to users nationwide, a possible penalty that could cost Kalshi an estimated $36 billion, according to a statement of facts accompanying the lawsuit.
“Kalshi has chosen to ignore New York’s gambling 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,” Governor Kathy Hochul said.
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