New York Seeks $36 Billion Penalty Against Kalshi as State Gaming Crackdown Escalates
State regulators accuse the prediction market operator of illegal gambling as federal officials launch a counter-suit.
New York gaming regulators have launched a massive legal action against Kalshi, filing a court petition that threatens the prediction market giant with an estimated $36 billion in civil penalties for operating an illegal gambling platform.
The enforcement action, filed Friday in state court, accuses the New York-headquartered firm of facilitating unlicensed sports, political, and cultural wagering without authorization from the New York State Gaming Commission. State officials are seeking penalties of $100,000 for each illegal sports-betting offer made on the platform.
The state’s move immediately triggered a jurisdictional showdown with federal regulators. Commodity Futures Trading Commission Chairman Michael Selig announced that the federal agency has filed a lawsuit aimed at blocking New York’s petition, reaffirming its stance that event contracts fall strictly under federal oversight as derivatives.
Under Selig’s leadership, the Commodity Futures Trading Commission reversed its previous intent to ban political and athletic event contracts. The agency now asserts exclusive regulatory authority over exchanges like Kalshi under federal law, prioritizing market oversight against fraud and insider trading over state-level gambling enforcement.
The escalating feud comes as Kalshi experiences unprecedented commercial growth. The exchange saw its annualized trading volume triple over a six-month span to reach $178 billion in May. After securing $1 billion in funding at a $22 billion valuation, the company has reportedly been preparing a new capital raise targeting a valuation close to $40 billion.
However, legal analysts warn that New York’s state court filing poses a severe hazard to the platform’s financial stability. Because Kalshi maintains its corporate headquarters in New York, the state attorney general possesses unique statutory authority to pursue nationwide disgorgement of illicitly generated revenue.
Gaming law expert Daniel Wallach of Wallach Legal highlighted that New York’s clawback provisions allow regulators to pursue funds connected to illegal operations across all 50 states. Wallach characterized the proposed $36 billion penalty as a conservative calculation that represents an existential risk to Kalshi, noting that the sum eclipses the company’s established market valuation.
State-level challenges to prediction markets have gained momentum nationwide. Regulators in Washington state recently obtained a judicial injunction halting Kalshi’s local operations, while authorities in Nevada, Michigan, and Massachusetts have achieved comparable victories within their respective state court systems.
Friday’s filing follows months of preliminary litigation between Kalshi and state gaming authorities. Kalshi initially sued New York regulators in federal court nine months ago, seeking to restrain the state from enforcing its gambling statutes against event contracts. Federal courts rejected Kalshi’s requests for a temporary restraining order and preliminary injunction in July, subsequently denying an emergency motion for injunctive relief pending appeal later that month.
