The Kalshi New York lawsuit shifted venue last week when the prediction market operator removed Attorney General Letitia James’s $36 billion petition to the U.S. District Court for the Southern District of New York, roughly eight hours after it was filed on 31 July. The move temporarily neutralised the state’s push for an immediate preliminary injunction: New York Supreme Court Justice Melissa A. Crane treated that request as moot once the case was no longer before her court.
The procedural step did not touch the substance of New York’s allegations. Those remain very much live.
Inside the Kalshi New York Lawsuit
The New York AG’s verified petition accuses Kalshi of repeatedly violating state gambling laws by offering event contracts without a New York State Gaming Commission licence. The state is seeking a permanent injunction, disgorgement, restitution and civil penalties of $100,000 for each alleged unauthorised sports wagering offer, with total relief sought reaching at least $36 billion.
The petition cites a reported $22 billion company valuation and annualised transaction volume of $178 billion. Those figures appear as firm-reported numbers in the state filing; they are not court findings.
The state’s enforcement posture has been building for months. The New York State Gaming Commission sent Kalshi a cease-and-desist on 24 October 2025, directing the firm to stop ‘illegally operating, advertising, promoting, administering, managing, or otherwise making available an unlicensed mobile sports wagering platform in New York State in connection with any sports event.’ Four days later, on 28 October 2025, the Commission agreed to hold off on enforcement pending a ruling on Kalshi’s injunction request in the Southern District, according to the AG’s petition.
Torres Already Ruled Against Kalshi Once
The federal court Kalshi chose as its forum has not been friendly. On 7 July, U.S. District Judge Analisa Torres refused to block the Gaming Commission from applying state gambling laws to Kalshi’s sports contracts. She found Kalshi had not made a clear showing it was likely to succeed on the merits, and concluded that New York’s interests in preventing gambling addiction, preserving sports integrity and avoiding a proliferation of unregulated contracts ‘heavily’ outweigh Kalshi’s interests, according to Reuters. The full opinion is published on the AG’s site.
Kalshi appealed and on 15 July filed a letter motion for an emergency injunction pending that appeal, with the court ordering defendants to respond by 22 July, according to CourtListener docket records. Those emergency requests were also denied.
Governor Kathy Hochul joined James in the lawsuit announcement, and both issued a joint statement after Torres’s 7 July ruling: ‘New York’s gambling laws are designed to protect consumers. We will continue to hold all gambling platforms accountable to the law, and that includes prediction markets,’ Reuters reported. New York is not acting alone. James has also joined a bipartisan coalition of 37 attorneys general filing an amicus brief in Massachusetts’s separate lawsuit against Kalshi for the same category of alleged violations, according to the AG’s press release.
Mansour’s Nasdaq Comparison and What It Is Actually Arguing
CEO Tarek Mansour pushed back in a CNBC interview on 3 August, comparing Kalshi’s structure to Nasdaq: users trade against each other, the platform matches positions and collects transaction fees. He argued that officials could ‘copy and paste that lawsuit and file it against Nasdaq.’ The comparison is Kalshi’s core legal thesis: event contracts are financial instruments, not wagers.
Kalshi’s regulatory foundation supports that framing. The CFTC granted Kalshi its Designated Contract Market designation on 3 November 2020, and on 17 January 2025 approved a modification to permit intermediated futures trading. The CFTC has itself argued in an April federal complaint that Congress gave it exclusive authority over contracts traded on registered derivatives exchanges, putting it directly at odds with the state position.
New York’s counterargument is that federal registration does not launder the products’ gambling character under state law. Courts have not produced a consistent answer. A Washington judge blocked Kalshi sports contracts; a Minnesota federal judge reached the opposite early conclusion and temporarily blocked that state’s prediction market ban.
Mansour also cited figures that should be read as company claims: he said New Yorkers collectively earned more than $200 million on Kalshi during 2026, and that a proposed arrangement could generate nearly $10 billion in state tax revenue over five years. No supporting calculations were published during the interview.
The broader market Kalshi is competing in is growing fast regardless of the litigation. Combined trading volume across Kalshi and rival Polymarket exceeded $40 billion in 2025, with Kalshi accounting for almost $23 billion of that, according to KPMG figures cited by ICLG.
The federal judge now assigned to New York’s newly removed case must first decide whether federal jurisdiction holds. A remand would send the case back to state court, allowing James to refile the preliminary injunction request immediately. Keeping it in federal court consolidates the venue with the existing CFTC preemption questions, but given Torres’s record on this dispute, that is not obviously the safer ground for Kalshi.
