New York's attorney general has escalated its crackdown on prediction-market exchange Kalshi, filing a court petition to force the company to identify local customers and hand over details of their wagers and losses. The move comes even as Kalshi and blockchain-based rival Polymarket posted a record $50.59 billion in combined monthly trading volume in July, driven by World Cup excitement and the long-awaited opening of Polymarket's US platform.
According to a verified petition dated July 31 and filed in Manhattan state court, Attorney General Letitia James seeks to permanently bar Kalshi from offering what the state calls unlicensed sports wagering to New York residents. The state is asking for an order compelling Kalshi to provide the names of affected customers, itemized records of all wagers and losses, and an accounting of the company’s gains from those activities. The petition also demands customer restitution, damages, disgorgement, interest, and statutory penalties—including three times Kalshi’s alleged gains and $100,000 for each unauthorized sports-wagering offer. No liability has been found, and no sums have been awarded; the court has yet to rule on the requests.
The case follows an October 2025 cease-and-desist letter from the New York State Gaming Commission. Kalshi responded by suing state officials in federal court, arguing that its status as a federally regulated exchange designated by the Commodity Futures Trading Commission (CFTC) preempts state gambling laws. On July 7, a US District Court in New York denied Kalshi’s request for a temporary restraining order against state enforcement, though the broader preemption question remains undecided. Kalshi has since appealed that denial to the Second Circuit.
The legal cloud contrasts with booming volumes across prediction markets. Data from The Block shows Kalshi, Polymarket and Polymarket US together topped $50.59 billion in July, up 7.8% from June. Kalshi led with $37.7 billion, a 14% month-on-month gain. Polymarket US, which dropped its waitlist in May and now allows all American traders, saw volume jump 54% to $5 billion, while the offshore Polymarket platform contracted 26% to $7.9 billion, suggesting users migrated to the regulated alternative. The FIFA World Cup, held June 11 to July 19, fueled much of the surge: Kalshi’s market on the Spain-Argentina final alone drew $1.9 billion, and Polymarket’s World Cup winner bet attracted roughly $4 billion. After the tournament, open interest fell from about $2 billion at the start of July to $1.2 billion by month’s end.
More than a dozen state regulators have taken action against prediction-market operators, branding sports-related contracts as unlicensed gambling. The CFTC and the platforms argue that federal oversight over event contracts should preempt state interventions, but the legal battles are far from resolved. The New York petition represents one of the most aggressive state-level efforts to date, seeking both injunctive relief and severe financial penalties. For now, Kalshi’s ability to continue serving New Yorkers hangs on a complex jurisdictional fight.
