A New York judge has ended the state-court proceeding against prediction-market operator Kalshi after the company shifted the fight to federal court, leaving Attorney General Letitia James’ request for immediate restrictions undecided.
Supreme Court Justice Melissa A. Crane ruled Monday (August 3) that New York’s request for an injunction or restraining order was moot. She denied it without prejudice, allowing the state to try again if a federal judge sends the case back.
Crane also told the New York County Supreme Court clerk to mark the proceeding as disposed.
The procedural turn came after Kalshi filed for removal on July 31 while New York’s request for emergency relief was still awaiting a decision.
“Respondent removed this matter to federal court on 7/31/26 (Doc 59 [notice of removal]),” Crane wrote in the order.
“Accordingly, it is ORDERED that Motion 01 is denied as moot, without prejudice to a new motion should the federal court remand this special proceeding.”
New York Kalshi case moved to federal court
Behind that procedural ruling is a clash over whether Kalshi’s event contracts amount to gambling under New York law. James and Gov. Kathy Hochul announced the lawsuit July 31, accusing Kalshi of offering contracts tied to sports, elections and other events without a state gaming license.
The state wants Kalshi blocked from operating in New York and is seeking restitution, alleged profits, customer accounting and civil penalties.
“Kalshi has chosen to ignore New York’s gaming 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,” Hochul said in a statement. “This choice has consequences, and working closely with Attorney General James, New York is taking action to stop this illegal behavior and bring Kalshi into compliance, because no company is above the law.”
“New York’s gambling laws protect children from underage betting and help combat gambling addiction,” James said. “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.”
Kalshi launched its platform in 2021 and expanded into sports markets in January 2025, promoting “legal sports markets, accessible to Americans in all 50 states.”
“Respondent has reported a $22 billion valuation of its gambling business and an annualized transaction volume of $178 billion,” the petition states, accusing Kalshi of avoiding state gambling rules through “event contracts” offered on a “prediction market.”
Investor Protection Bureau Chief Shamiso Maswoswe said New Yorkers remained exposed while Kalshi operated.
“I submit this affirmation of emergency because Respondent is presently violating the laws of this State,” Maswoswe wrote, saying “each day these unlicensed and underregulated entities are operating within and from New York subjects New Yorkers to actual harm.”
“Respondent continues to operate its gambling platform from New York,” the affirmation states.
Hochul has separately targeted prediction-market conflicts involving public employees. “Getting rich by betting on inside information is corruption, plain and simple,” she said.
Crane’s order settles none of those allegations. For now, the federal court will determine what happens next, including whether the dispute returns to state court.
Featured image: Kalshi / Canva
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