New York State has filed a lawsuit against Kalshi, alleging that the prediction market is a “gambling platform.” 

The lawsuit accuses Kalshi of offering sports and event betting in the state without a gaming license.

The state government is asking a judge to bar Kalshi from operating an unlicensed gambling business in New York and seeks an accounting of customer bets, losses, and company gains.

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New York is also seeking restitution, damages, and civil penalties against Kalshi as part of the legal action.

Lawyers acting on behalf of the government have asked the judge to award New York a penalty equal to three times Kalshi’s gains from its activities in the state, plus $100,000 U.S. for each unauthorized sports wager. 

The lawsuit has been filed on behalf of New York Governor Kathy Hochul and Attorney General Letitia James.

Kalshi, which was valued at $40 billion U.S. in a June funding round, is facing growing legal challenges to its business that lets people bet on real-world events such as sports and elections. 

In Minnesota, Kalshi and rival Polymarket scored a win when a U.S. District Court recently ruled that a state law banning prediction markets likely runs afoul of securities laws. 

In that case, the Minnesota judge granted a preliminary injunction against the law to enable both Kalshi and Polymarket to continue operating in the state. 

The Commodity Futures Trading Commission (CFTC) has claimed regulatory jurisdiction over prediction markets and said they should not be regulated by states like other gaming companies

In its lawsuit, New York claims that Kalshi takes wagers on professional and college sports, elections and culture. 

The lawsuit alleges Kalshi allows users aged 18 to 20 to wager and lists markets involving New York college teams, both prohibited for licensed sportsbooks in the state.

The recently completed World Cup soccer tournament gave a boost to Kalshi and Polymarket’s platforms. Kalshi claims to have added three million new users during the World Cup.

Kalshi and Polymarket are each privately held and their stocks do not trade on public exchanges.