NY sues Kalshi over alleged unlawful playing operation as prediction market warfare heats up
New York on Friday sued Kalshi, accusing the federally regulated prediction market operator of running an illegal gambling business in the Empire State in the latest legal challenge to at least one of the nation’s hottest startups.
The lawsuit, filed in Manhattan state court docket by Attorney General Letitia James, alleges Kalshi has been offering New Yorkers unlawful playing merchandise without a state license, exposing customers — including some between the ages of 18 and 20 — to financial hurt while avoiding taxes and regulatory obligations imposed on licensed sportsbooks.
The case, which was first reported by Bloomberg News, marks the latest escalation in the more and more contentious battle over prediction markets, which has also spilled into a deeply private feud between Kalshi and chief rival Polymarket.
Kalshi is dealing with a lawsuit from New York Attorney General Letitia James, who alleges the federally regulated prediction market operator is operating an unlawful playing business in the state. IMAGN IMAGES through Reuters Connect
As The Post completely reported Friday, the rivalry between the two firms has become increasingly vicious behind the scenes, with Polymarket CEO Shayne Coplan allegedly referring to Kalshi as a “copycat,” circulating unsubstantiated private rumors about Kalshi co-founders Tarek Mansour and Luana Lopes Lara and rising more and more annoyed as Kalshi surpassed Polymarket in trading quantity.
Sources told The Post that Coplan turned enraged after Donald Trump Jr. joined Kalshi as a strategic adviser before later also becoming a member of Polymarket, while each firms have traded accusations over leaks, soiled tips and efforts to undermine one another.
Kalshi has denied allegations of company espionage while Polymarket has denied Coplan unfold the alleged rumors.
Friday’s lawsuit provides another headache for Kalshi, which has argued that because it operates as a federally regulated exchange overseen by the Commodity Futures Trading Commission, states can’t shut down its markets.
“It’s sad to see this type of political theater from the leadership in our own state,” Kalshi spokeswoman Elisabeth Diana said in a assertion to Bloomberg News.
Kalshi co-founder and COO Luana Lopes Lara helped launch the company after graduating from MIT with co-founder Tarek Mansour. Sportsfile through Getty Images
“States can’t just shut down a federally licensed exchange. This would also hurt New Yorkers, who would be driven offshore.”
Gov. Kathy Hochul and James countered that Kalshi has ignored New York’s gaming legal guidelines by failing to acquire a license from the New York State Gaming Commission while sidestepping taxes and shopper safety guidelines that apply to casinos and cell sportsbooks.
The criticism follows a separate setback for Kalshi earlier this month, when a New York choose ruled the company couldn’t block state gaming regulators from overseeing its sports activities prediction markets, even as the company has scored victories elsewhere arguing that federal law preempts state playing laws.
Kalshi co-founder and CEO Tarek Mansour has defended the company’s prediction markets as federally regulated financial merchandise amid mounting legal challenges from state regulators. Sportsfile for Web Summit through Getty Images
Kalshi co-founders Tarek Mansour and Luana Lopes Lara have constructed the startup into one of the largest prediction-market platforms in the US because it battles regulators over its business mannequin. EMMY PARK
According to the criticism, New York contends Kalshi’s prediction markets “meet the legal definition of gambling because the outcomes of the events on which its users are betting are uncertain and outside the control of the bettor or hinge on a game of chance.”
The swimsuit comes as Kalshi has quickly expanded from election betting into markets tied to sports activities, leisure, climate and other real-world occasions, serving to propel the company ahead of Polymarket in trading quantity.
The Post has sought remark from Kalshi, Hochul and James.
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