New York has filed a comprehensive lawsuit against Kalshi, seeking to block the prediction market platform's operations and recover at least $36 billion in penalties and restitution over alleged violations of state gambling laws. According to the New York Attorney General's Office, Attorney General Letitia James filed the lawsuit on July 31, 2026, asking the court to immediately halt Kalshi's relevant event contracts in the state and require the company to pay restitution to affected users along with civil penalties. The complaint alleges that Kalshi has been offering event contracts tied to sports, elections and cultural events without obtaining a license from the New York State Gaming Commission, with state officials arguing those contracts fall within New York's legal definition of gambling rather than federally regulated derivatives. New York also alleged that Kalshi allowed residents under the state's legal gambling age of 21 to participate in its markets, exposing them to financial risks while bypassing consumer protections required under state law. The lawsuit, filed in the New York Supreme Court, seeks triple Kalshi's gains from the activity, plus $100,000 for each unauthorized or attempted offer of sports or mobile sports wagering, along with a full accounting of customer bets, losses and company profits.
A coalition of 38 state attorneys general has formally challenged the U.S. Commodity Futures Trading Commission's proposed prediction market regulations, urging the agency to withdraw and rewrite its framework over legal concerns. Led by Ohio Attorney General Andy Wilson, the coalition submitted their letter Monday as the public comment period on the CFTC's proposed amendments to Rule 40.11 came to a close. The attorneys general argue that the CFTC's proposed framework 'goes well beyond its statutory authority' and should be replaced with a new rule consistent with federal law and the U.S. Constitution. According to the filing, the proposal would substantially expand federal oversight into gambling, a field traditionally regulated by states, while giving the CFTC authority over an area carrying significant economic and political implications without clear Congressional authorization.
A federal judge in Wisconsin has dealt a significant blow to the CFTC's efforts to shield prediction market platforms from state gambling enforcement. Judge William Griesbach of the U.S. District Court for the Eastern District of Wisconsin denied the CFTC's request for a preliminary injunction against Wisconsin's enforcement of gambling laws. The CFTC filed the federal case in April after Wisconsin sued Kalshi, Polymarket, Crypto.com, Robinhood, and Coinbase, alleging that sports event contracts offered through these platforms amount to unlicensed sports betting. Judge Griesbach found that the CFTC had not shown it was likely to succeed on the merits, face irreparable harm, or benefit from the balance of equities required for a preliminary injunction. The court also rejected requests from Kalshi and Crypto.com to intervene and seek preliminary relief in the federal dispute.
A federal judge on Monday halted Minnesota's prediction market ban just days before it was set to take effect. District Judge Katherine Menendez issued a preliminary injunction after finding that federal law likely preempted the state law, which was set to take effect on Saturday. The ruling came at the behest of Kalshi, Polymarket and the U.S. Commodity Futures Trading Commission (CFTC) after the companies sued following Democratic Governor Tim Walz's signing of the measure into law in May. The judge's decision allows both platforms to continue operating in Minnesota while the litigation moves forward, with Kalshi spokesperson Elisabeth Diana stating that the ruling makes clear states cannot ban things they don't have jurisdiction over. However, this victory came hours after another federal judge in New York declined to stop the state from enforcing its gambling laws against Kalshi, leaving the platform without preliminary relief it had sought.
Separate from New York's lawsuit, the Commodity Futures Trading Commission filed its own motion for a temporary restraining order on Thursday seeking to prevent New York from pursuing criminal or civil enforcement against Kalshi and other CFTC-registered prediction market platforms. The regulator has argued in multiple cases that Congress gave it exclusive authority to oversee federally registered event-contract markets and that states should not regulate products listed on designated contract markets. That position remains central to Kalshi's appeal as the company continues arguing that its contracts fall within the CFTC's exclusive jurisdiction under the Commodity Exchange Act. The commission has also proposed a new regulatory framework that would establish a contract-by-contract review process for event contracts involving gaming, unlawful conduct, war, terrorism and assassination, with the proposal's public comment period closing on July 27.
The legal action against Kalshi represents the most aggressive state enforcement yet, with 38 state attorneys general now aligned against the platform through an amicus brief supporting Massachusetts in a parallel case. According to the latest reports, the coalition spans from Alabama to Wisconsin, including red states, blue states, and the District of Columbia. The enforcement wave has accelerated through 2026, with Massachusetts securing a court order restricting Kalshi, Michigan obtaining a temporary restraining order, and Nevada issuing a TRO covering sports, election, and entertainment contracts. Washington also holds its own court order restricting the platform, while Wisconsin recently handed down an adverse ruling. New York itself previously sued Coinbase and Gemini in April 2026 on similar prediction-market allegations, signaling that the state views any company offering prediction-style products to state residents as subject to gaming law regardless of their primary business focus.
According to Crypto.news, the competitive landscape has shifted dramatically during 2026. During July 2025, Kalshi accounted for approximately 36.73% of prediction market trading activity, while the remainder belonged almost entirely to Polymarket. By 2026, Kalshi's market share more than doubled, reflecting significantly faster growth than competing platforms. Monthly trading volumes illustrate this expansion, with Kalshi generating approximately $740 million in July 2025, while Polymarket recorded around $1.28 billion. By 2026, cumulative trading volumes had increased substantially, with Polymarket reaching $101.23 billion and Kalshi surpassing it with $11.72 billion in total trading activity. The growth reflects more than increasing user numbers, with higher trading volumes indicating greater market participation and improved liquidity across multiple event categories. The World Cup helped boost Kalshi's numbers, adding 3 million users during the course of the tournament, more than double the 2 million the firm said it had at the start of May.
