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New York’s lawsuit against Kalshi is now a major front in the broader fight over whether sports event contracts should be treated like federally regulated financial products or state-regulated gambling.
A new report from _GGB Magazine_ says that dispute is reshaping the industry, including the American Gaming Association’s relationship with major sportsbook operators. For New York readers, the clearest takeaway is that the state is taking an aggressive position while the federal-state jurisdiction battle is still unsettled.
New York case raises stakes in prediction market dispute
According to the report, Gov. Kathy Hochul and Attorney General Letitia James filed a $36 billion lawsuit against Kalshi in July. The suit reportedly seeks damages of $100,000 per unauthorized user.
The article frames New York’s challenge as part of a wider push by state officials who argue sports-event contracts look too similar to sports betting to sit outside state gambling rules. That matters in a state where online sportsbooks already operate under a 51% tax rate, tied for the highest in the nation, while prediction markets are being criticized by gambling stakeholders as operating under a very different tax and compliance structure.
Bill Miller, the American Gaming Association’s president, argued that sports-event contracts threaten state and tribal sovereignty and bypass consumer protections and responsible gaming standards. In remarks cited by _GGB_, Miller said prediction markets “pay a pittance in taxes” compared with the regulated gaming industry.
Sportsbooks and the AGA are splitting over the issue
The same report says FanDuel and DraftKings left the AGA on Nov. 18, 2025, because of disagreement over how prediction markets should be regulated. Fanatics and bet365 later followed, leaving BetMGM and Caesars Sportsbook as the only major sportsbook brands with an outsized Las Vegas presence still in the trade group, according to the article.
That split reflects how large the opportunity has become. _GGB_ reports that Kalshi recorded more than $36 billion in trading volume in July, with sports making up about 80% of its markets. The article also says Kalshi and Polymarket have both pursued valuations above $20 billion.
What New York players should watch next
The legal fight is no longer just about one platform. The report says the Commodity Futures Trading Commission maintains that event contracts listed on designated contract markets fall under exclusive federal jurisdiction, while states including New York are pushing back. It also notes that the U.S. Court of Appeals for the Third Circuit ruled federal law preempts New Jersey from enforcing state gambling rules against Kalshi.
For players, the biggest near-term issue is uncertainty: which rules will apply, which products remain available, and whether responsible gaming and consumer protections will be set by state gambling regulators or federal commodities law. The Nevada dispute discussed in the report could reach the Ninth Circuit and possibly the U.S. Supreme Court, making further court action worth watching.
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Source: As reported by ggbmagazine.com.
