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'An Illegal Gambling Operation': Online Prediction Market Kalshi Sued by New York
"No matter what they call themselves, prediction markets like Kalshi are gambling platforms, plain and simple," said New York Attorney General Letitia James.
Jul 31, 2026
The state of New York on Friday announced it was suing online prediction market Kalshi for operating as "an illegal gambling operation."
In a complaint filed with the New York State Supreme Court, New York Attorney General Letitia James alleged that Kalshi was running an unlicensed gambling business "in flagrant disregard" of the Empire State's "constitution, penal laws, and other statutes."
The complaint notes that, among other things, Kalshi allows users as young as 18 years old to place bets on its platform, while New York state law limits legalized gambling to persons aged 21 or older.
"New York’s gambling laws protect children from underage betting and help combat gambling addiction," said James in her announcement of the lawsuit. "No matter what they call themselves, prediction markets like Kalshi are gambling platforms, plain and simple. By ignoring our laws, Kalshi is running an illegal operation and harming New Yorkers in the process. We are taking them to court to uphold our laws and protect New Yorkers."
James' lawsuit asks the court to permanently bar Kalshi from operating inside the state unless it obtains a license from the New York State Gaming Commission; ordering it to "produce an accounting of all bets placed, monies lost by customers in connection with its gambling business"; and forcing it to pay assorted "restitution, disgorgement, damages, and penalties" for its assorted violations of the law.
New York Gov. Kathy Hochul, in a statement supporting the lawsuit against Kalshi, accused the company of ignoring state gambling 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."
Minnesota state Rep. Emma Greenman (D-63B), who earlier this year authored legislation to ban prediction markets in her state, said that teenagers getting hooked on gambling apps is becoming a major problem.
“We’re seeing studies come out that say [the companies] are targeting 18- to 21-year-olds,” said Greenman, “and we are seeing gambling starting younger and younger.”
President Donald Trump's administration, however, has regularly worked to quash state governments' efforts to regulate online prediction markets such as Kalshi and Polymarket.
Specifically, the administration has stacked the Commodity Futures Trading Commission (CFTC) with prediction market and sports betting industry insiders who have been pursuing legal action against any states attempting to clamp down on the online gambling platforms.
Earlier this year, CFTC Chair Michael Selig warned states against trying to regulate prediction markets, which he said would “circumvent the clear directive of Congress.”
“Our message to Wisconsin is the same as to New York, Arizona, and others,” said Selig. “If you interfere with the operation of federal law in regulating financial markets, we will sue you.”
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Coalition Rejects Trump Admin Push to Let Kalshi, Polymarket 'Bypass State Gambling Regimes'
"We urge the commission to withdraw this proposal, enforce the rules already on the books, and return its attention to the derivatives markets it was created to protect—and which genuinely need its attention."
Jul 24, 2026
A coalition of consumer advocacy groups on Friday forcefully condemned the Commodity Futures Trading Commission's move to give prediction market platforms like Kalshi and Polymarket "a green light to bypass state gambling regimes."
Users of these platforms can bet on future events, from the outcome of a sports game to the language of a political speech, by buying "shares," or "contracts." The Trump administration claims the platforms are not gambling operations, but derivatives markets because, as Chair Michael Selig has noted, "Congress has entrusted the CFTC with the sole authority to regulate" those.
Various state leaders and organizations have pushed back, arguing that "calling a sports wager an 'event contract' does not transform it into a legitimate tool for managing economic risk," as Demand Progress Education Fund communications director Eric Naing said Friday. "The CFTC should not allow federal derivatives law to become a back door for nationwide gambling."
However, the CFTC has stuck to its position, publicly backed by President Donald Trump, who has declared that the agency must have "exclusive authority" over this "major industry," which "we must protect." The Republican—who infamously bankrupted multiple casinos—notably has a company exploring how to cash in on the sector.
The CFTC announced its proposed rules for prediction markets in March, followed by an update last month. In a Friday letter to the agency chair, Demand Progress Education Fund and 10 other organizations wrote that "we oppose the proposal in its entirety. It fails as a matter of law, as a matter of policy, and as a matter of institutional competence, and we emphatically urge the commission to withdraw it."
"When Kalshi and Polymarket launched just five years ago, they were curiosities; today Kalshi alone is valued at $22 billion and processes an annualized volume of $178 billion in trades every month," the coalition detailed. "This proposal should be understood for what it is: a green light for these immense and largely unregulated financial speculation platforms to offer sports betting nationwide and aggressively market it to the public, bypassing the community and mental health protections that states and tribal authorities have spent generations building to address the risks present in this type of speculative activity."
The fact that 89% of Kalshi's total fee revenue comes from sports-related contracts "should settle the question of whether these companies are derivatives exchanges or sportsbooks," according to the coalition, which also includes Americans for Financial Reform Education Fund, Better Markets, Center for Digital Democracy, New Jersey Appleseed Public Interest Law Center, Open Markets Institute, Oregon Consumer Justice, Oregon Consumer League, Protect Borrowers, Public Good Law Center, and Revolving Door Project.
However, the organizations also challenge the CFTC's interpretation of the Commodity Exchange Act, writing that the proposal's "framing inverts the statute's logic and Congress' intent, by treating contracts as presumptively allowed unless found contrary to the public interest through a case-by-case inquiry."
If the agency charges ahead with its current plans, "ordinary people will pay the price," the groups warned. "Expanded sports betting has increased personal bankruptcies, reduced household savings, and led to higher rates of domestic violence. Prediction markets supercharge these effects: they run 24/7 in your pocket and aggressively market to young adults, who may make low bets initially but ramp up their commitment over time. Seventy percent of users lose money, and 70% of all profits go to 0.04% of traders. Those outcomes define a casino that has figured out how to escape the regulations that casinos have to follow, like responsible gaming disclosures and financial stability protections for their customers."
"The proposal also does almost nothing to address the insider trading problem that makes prediction markets much more easily manipulated than the structures of ordinary gambling," the coalition wrote—just over a week after the White House had to address one of Trump's teleprompter operators allegedly using his access to the president's speech plans to make money on Kalshi.
The organizations further argued that "even if the commission were the right institution to police all of this, it is not capable of doing so. The CFTC, which oversees $400 trillion in US derivatives markets, has a budget frozen at $365 million... Adding nationwide responsibility for sports betting, entertainment wagering, and political gambling on top of that is not a proper expansion of the agency's mission, and it would mean that the farmers, manufacturers, and energy companies who depend on well-functioning commodity markets will pay the price."
"We urge the commission to withdraw this proposal, enforce the rules already on the books, and return its attention to the derivatives markets it was created to protect—and which genuinely need its attention," concluded the coalition. "The regulation of gambling and gaming belongs with the states and tribal authorities that have the experience, the tools, and the democratic accountability to do the job."
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Watchdog Demands Insider Trading Probe After ‘Highly Suspicious’ Bets on Iran War
"Several very substantial bets were placed in the last-minute moments prior to the February 28 attack," said a representative for Public Citizen.
Mar 06, 2026
A consumer watchdog group is calling on the federal agency that regulates prediction markets to investigate what it says are a series of "highly suspicious bets" placed on President Donald Trump's war with Iran.
In a letter sent on Thursday to Michael Selig, the chair of the Commodity Futures Trading Commission (CFTC), a representative for the group Public Citizen pointed out that users have been able to make off with six-figure winnings from betting on political outcomes using platforms like Kalshi and Polymarket, which "advertise that you can bet on almost anything, anywhere."
"While bets on the future of the Iranian regime had been sporadic and imprecise for months before the invasion, several very substantial bets were placed in the last-minute moments prior to the February 28 attack," wrote Public Citizen's government affairs lobbyist Craig Holman.
"For most of the year, bets of [Iranian Supreme Leader Ayatollah Ali Khamenei] being removed from power were long shots and low-balled guesses," Holman said. "In just the few hours before public announcement of the February 28 attacks, the odds and amount of the bets changed radically, rising from small bets at less than 25% to a few very large bets at over 50%. In the end, a few anonymous bettors hit the nail on its head and became very wealthy."
Holman pointed to a report from NPR that an anonymous account with the username “Magamyman” made more than $553,000 placing bets on Polymarket just before the Iranian leader was killed by an Israeli strike Saturday.
The Wall Street Journal, meanwhile, reported findings from the crypto analytics firm Bubblemaps, which identified “six suspected insiders” who had won a $1.2 million profit on a US strike through Polymarket. As the Journal wrote:
Most of them bet on a strike by February 28, which turned out to be the exact date of the operation, the firm said. One such user bet $26,000 and won over $200,000, a return upward of 657%.
These users’ bets were among half a billion placed on Polymarket alone regarding the precise timing of US strikes on Iran.
Sen. Chris Murphy (D-Conn.) said "it’s insane this is legal" and that "people around Trump are profiting off war and death." He added that he was "introducing legislation ASAP to ban this."
Holman asked Selig to identify the users who placed the highly lucrative bets and who, within the Trump and Netanyahu administrations, may have been privy to insider knowledge about the strikes.
The Trump family is deeply intertwined with the world of prediction markets. The president's media company, earlier this year, partnered with Crypto.com to launch its own prediction platform called "Truth Predict." Meanwhile, Donald Trump Jr. is an adviser to both Polymarket and Kalshi.
The president's CFTC chair, Selig—who has appointed the CEOs of prediction market platforms as advisers—has sought to shield betting markets from regulatory scrutiny, describing his goal as ushering in "the Golden Age of American financial markets."
Last month, facing what he called “an onslaught of state-led litigation,” Selig made the legally questionable assertion that Congress had given his agency the exclusive authority to regulate these platforms, not as tightly controlled gambling hubs but as commodities markets, which have much looser rules.
The Iran war is not the first time that mystery users have walked away with massive hauls after placing fortuitously timed bets on Trump's military operations. In January, a user won $436,000 on a bet that Venezuelan President Nicolás Maduro would be ousted by the end of the month, which they'd placed just hours before Trump's operation to remove him from power.
“Allowing prediction market platforms to bet on virtually anything, any time, is a recipe for disaster,” Holman said. “The American people should not have to wonder whether government officials are exploiting their access to classified information to make a quick buck. The CFTC must act swiftly to regulate platforms like Kalshi and Polymarket in order to protect the public.”
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'Patently False': Trump Official Blasted Over Claim That CFTC Has Power to Oversee Prediction Markets
The Trump family stands to make big money from the total deregulation of “prediction markets.” A key official now claims they can only be overseen by a federal agency in bed with industry CEOs.
Feb 20, 2026
As President Donald Trump plans to profit from his own "prediction" betting app, his administration is claiming that sole regulatory oversight of the burgeoning gambling industry belongs to an agency advised by executives from the multibillion-dollar betting companies themselves. Critics say it's totally illegal.
On Tuesday, Mike Selig, the chair of the Commodities Futures Trading Commission (CFTC), announced that the agency had filed a brief attempting to fight "an onslaught of state-led litigation" against companies like Polymarket, Kalshi, Crypto.com, and other apps.
States have alleged that these apps—which allow users to earn money by making accurate predictions on sports and other events—should be regulated similarly to gambling apps, which are subject to licensing requirements, age restrictions, and tax obligations.
But the brief filed by Selig asserts that the CFTC, which has much looser regulations, has "exclusive jurisdiction" over the prediction apps, which he referred to as "derivatives markets"—a term for venues where people trade financial contracts backed by stocks, bonds, or commodities.
"American prediction markets aren’t new. They have been regulated by the CFTC for more than two decades and serve legitimate economic purposes," he said. "These markets have changed the way people consume news, monitor events, [and] engage in politics, and can be more accurate than competing products."
"Congress gave the CFTC comprehensive authority over any contract based on a commodity, and the legal definition of a commodity is very broad," he continued.
Being regulated by CFTC is an obvious boon to the betting companies, because it essentially means they'll be regulating themselves.
As The Lever noted, Selig's statement came just days after he'd "recruited top executives from those same companies—including leaders from Polymarket, Kalshi, Crypto.com, DraftKings, and FanDuel—to help advise regulators on how to 'develop clear rules of the road for the Golden Age of American financial markets.'"
It's not merely a corporate giveaway, but also an apparent act of brazen self-dealing for the Trump family, whose media company just months ago partnered with Crypto.com to launch its own prediction platform called "Truth Predict."
It just so happens that Crypto.com's parent company also donated $30 million to Trump's super PAC in 2025. Meanwhile, Donald Trump Jr. is an investor and unpaid adviser to Polymarket and a paid adviser to Kalshi.
Prediction betting apps, which allow users to make money predicting political events, have faced accusations of insider trading from those who may have foreknowledge of the Trump administration's activities.
In January, a user created a new account and bet $32,000 that Venezuelan President Nicolás Maduro would be out of power by the end of the month. Within hours, Trump had launched an operation to kidnap the president, netting the user a $436,000 payday.
Just days later, White House press secretary Karoline Leavitt drew suspicion when she abruptly looked up at the clock and ended a press conference just seconds before a Kalshi bet marked it to conclude, which allowed those who bet it would not go over time to win 50 times what they'd wagered. The White House denied any insider trading, calling it "100% Fake News."
While prediction markets have become the toast of the Trump administration, the push for near-total deregulation has even some Republicans worried.
Senate Agriculture Chair John Boozman (R-Ark.), whose committee oversees the CFTC, said on Wednesday that he'd be speaking with Selig about his announcement.
“This is an area that just caught fire. I don’t think anybody expected it to grow at the rate that it has,” Boozman said. “But there is concern; it’s the Wild West. There’s not much regulation.”
Democrats, meanwhile, argued that Selig was asserting authority that didn't exist.
"This is patently false," wrote Sen. Chris Murphy (D-Conn.) in a response to Selig's announcement on social media. "Congress has not given the exclusive power to the CFTC to regulate prediction markets. He just made this up out of thin air because the gambling companies that back Trump wanted him to."
Sen. Elizabeth Warren (D-Mass.) added that "Trump’s CFTC chair is trying to strip states of their authority to regulate gambling within their borders and hamstring their ability to protect Americans from getting ripped off."
Some states are still pushing ahead as usual. In an act of defiance to the administration, the same day as Selig's announcement, gaming regulators in Nevada appeared to thumb their nose at the CFTC by filing a lawsuit seeking to block Kalshi from operating sports betting in the state.
“Its continued operation harms the state and the public every day and poses an existential threat to the state’s gaming industry,” Jessica Whalen, chief deputy solicitor general for the attorney general’s office, wrote in the filing. “Kalshi has continued to dramatically expand its business, rather than attempting to maintain any kind of status quo.”
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