New York has filed a sweeping $36 billion lawsuit against prediction market platform Kalshi, accusing the company of operating what state officials describe as an “illegal gambling operation” while disguising its services as federally regulated financial products. The lawsuit seeks approximately $36 billion in civil penalties, making it one of the largest financial claims ever brought against a prediction market company. The lawsuit is the latest development in a broader regulatory battle over prediction markets across the United States. They contend that prediction markets improve price discovery and provide useful insights into the probability of future events. Conversely, a victory for Kalshi could strengthen the company’s argument that federally regulated exchanges are protected from state gambling laws.