New York Attorney General Letitia James has initiated legal action against Kalshi, requesting a Manhattan court to compel the prediction market operator to comply with a subpoena issued on September 25. The subpoena is part of an investigation into potential deceptive advertising practices involving influencer payments and the operational roles of Kalshi’s market makers, both in-house and external.
In her petition, James contends that Kalshi did not respond to the investigative subpoena concerning alleged fraud and deceptive conduct by itself and third parties in the prediction market sector. She has asked the New York County Supreme Court to enforce compliance with the subpoena by producing relevant documents within ten days and to impose penalties on the company for non-compliance.
The focus on marketing practices also draws parallels with ongoing issues in Utah, where Attorney General Derek Brown has included trading firms in a lawsuit alleging illegal gambling, claiming that these firms operate akin to a “house.” Earlier this year, James filed a lawsuit against Kalshi, alleging it operates an unlicensed sportsbook valued at $36 billion.
In addition, last month, the New York State Gaming Commission (NYSGC) began its own legal confrontation with Kalshi over the company's failure to heed subpoenas. James’s latest legal move centers around the marketing tactics employed by Kalshi, particularly concerning claims made in advertisements.
Her petition highlights three significant aspects of Kalshi's advertising strategy:
1. Influencer content portraying significant wins, including instances where users claim their Kalshi earnings covered living expenses.
2. Allegedly undisclosed sponsorships by content creators promoting Kalshi.
3. The marketing framing Kalshi as a peer-to-peer exchange with no house, despite the existence of affiliated market makers.
James emphasized the importance of examining Kalshi's advertisements and its dealings with third parties, arguing this scrutiny is crucial to determine if the company or its representatives have engaged in misleading or deceptive practices.
The subpoena outlines demands for extensive documentation related to:
– Marketing efforts directed by Kalshi, its co-founders Tarek Mansour and Luana Lopes Lara, and other associated personnel.
– Trades executed by paid promoters and payments made to them by Kalshi.
– Guidelines and materials related to marketing governance.
– Kalshi’s proprietary trading, market-making, and liquidity strategies.
– Relationships with third-party market makers and incentive programs.
Kalshi previously scrapped its volume incentives in October, responding to escalating concerns regarding the platform's trading activities.
The current court actions against Kalshi add to a series of legal battles facing the company. In October 2025, the NYSGC issued a cease-and-desist order, leading to Kalshi's counter-lawsuit. U.S. District Judge Analisa Torres denied Kalshi a preliminary injunction against the NYSGC in July, while a Second Circuit judge also declined to grant an injunction pending appeal. James’s overarching $36 billion lawsuit was filed on July 31, and although Kalshi transferred the case to federal court, a decision regarding New York's remand motion is still pending.
Additionally, the Commodity Futures Trading Commission filed suit against New York in April, subsequently issuing an emergency order for Kalshi to continue operations in the state, a demand New York seeks to challenge legally.
The NYSGC has also sought judicial enforcement concerning subpoenas issued on issues like sports contracts and age restrictions on users, with a hearing scheduled for December 14. In September, James also filed a lawsuit against Polymarket.
