WRGB Studios-Schenectady, NY — New York State is taking the lead in suing prediction market Kalshi, saying it violates the state’s laws against illegal gambling – specifically by offering sports-related wagers without a gambling license. That lawsuit, asking the company to fork over $36 billion.
That amount is an estimate of what the company has made from offering sports gambling, plus heavy fines for each instance they tried to offer those licenses. The lawsuit also looks to force Kalshi to get a gambling license – or prevent them from operating in the state.
Governor Kathy Hochul and Attorney General Letitia James write that the prediction market exposes New Yorkers to “serious personal and financial risk.”
“Kalshi has chosen to ignore New York’s gaming 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 Hochul writes.
Bob McLaughlin, partner at Whiteman, Osterman & Hanna, says prediction market companies have found a gray area in federal laws to get around state restrictions.
“So here, these prediction markets went a little bit too far. They’re using a a federal statute and a little gap in the federal statute to say, okay, we can do predictions,” McLaughlin said. “Federal court decisions and federal statutes make it very clear that gaming or gambling, whatever your choice is, is in the purviews of the states.”
Right now only nine companies, including FanDuel and DraftKings Sportsbooks, are authorized to operate sports wagering in the state. In order to make it there, they had to go through a detailed and competitive bidding process – and now pay 51 percent of their revenue in taxes to the state.
“Most jurisdictions, most regulators never go against the betters,” McLaughlin said. “They go against the companies, and so here they’re trying to seek damages for the wagers that have been made in New York State over the last year.”
The suit comes as prediction markets face legal action from states across the country; and legislative action to regulate markets is halted by federal courts. Just last week, Minnesota’s first-in-the-nation law banning prediction markets was blocked by a U.S. District Judge due to the possibility of harm to the operators.
It also follows last fall’s legal battle between the state and Kalshi. The New York State Gaming Commission ordered Kalshi to shut down what it called an “unlicensed mobile sports wagering platform” in the state. Kalshi responded by suing the commission and its members – that suit is still pending.
A spokesperson from Kalshi recently told CBS News that they were in talks with state officials. They also called the lawsuit from the Empire State “political theater” and said shutting their operations down would hurt New Yorkers.
You can watch the full conversation with Bob McLaughlin here: