New York State has sued Kalshi for allegedly running an illegal gambling operation in the state, marking another setback for the prediction market platform.

On Friday, New York Attorney General Letitia James filed a lawsuit seeking a court order to block Kalshi from operating in the state and require the company to pay fines and restitution to users.

According to a statement from the attorney general’s office, the lawsuit alleges that Kalshi enables users to wager on sports, culture and elections without obtaining a license from the New York State Gaming Commission.

The state argues that the company’s prediction markets meet the legal definition of gambling and that Kalshi exposed New York residents including individuals under the state’s legal gambling age of 21 to “serious personal and financial risk.”

Alongside the lawsuit, New York filed a motion for a temporary restraining order seeking to halt Kalshi’s relevant event contracts in the state. The motion also requests the court to order Kalshi to pay full restitution to users, disgorge all proceeds obtained through the offerings, and pay penalties equal to three times its gains, as well as $100,000 for each offering.

According to court filings, the requested compensatory damages could total at least $36 billion, pending a full accounting.

“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,” said New York Governor Kathy Hochul.

“New York’s gambling laws protect children from underage betting and help combat gambling addiction,” said Attorney General Letitia James. “No matter what they call themselves, prediction markets like Kalshi are gambling platforms, plain and simple.”