(Photo credit: Damian Giletto/Delaware News Journal / USA TODAY NETWORK via Imagn Images)

The state of New York filed a potentially $36 billion lawsuit against prediction-market giant Kalshi on Friday, accusing the company of 'running an illegal gambling operation.'

In a joint statement, governor Kathy Hochul and attorney general Letitia James announced that an investigation by James' office 'found that Kalshi's prediction market is an illegal, unlicensed gambling operation. Kalshi's illegal prediction market exposes New Yorkers -- including those under the legal gambling age of 21 -- to serious personal and financial risk.'

The state asserted that Kalshi's prediction markets are available to people 18 and older despite New York's legal gambling age being 21.

The suit is asking the state Supreme Court to force Kalshi to 'forfeit all illegal gains, distribute restitution to consumers who were harmed, and pay fines equal to three times the gains the company made through its illegal actions,' plus 'a penalty of $100,000 for each offering or attempt to offer sports wagering or mobile sports wagering in New York without authorization.'

Prediction markets allow users to buy and sell 'contracts' that predict future outcomes on an expansive list of topics, including politics, entertainment, weather and sports.

Kalshi, like other prediction markets such as Polymarket, argue they fall under federal jurisdiction -- specifically the Commodity Futures Trading Commission (CFTC) -- and not state jurisdiction. A series of lawsuits and legal maneuvering this week have seen both sides claim minor victories.

On Monday, Nevada announced an agreement with Kalshi forcing the company to use geolocating to block people inside the state from making trades.

A judge in Wisconsin on Wednesday refused to grant the CFTC a temporary injunction to block that state's ban.

But a Minnesota judge on Monday temporarily blocked the state ban on prediction markets.

On Friday, a Kalshi spokesperson said in a statement that New York's suit is 'political theater.'

'States can't just shut down a federally licensed exchange,' the statement read. 'This would also just hurt New Yorkers, who would be driven offshore. We love New York, we love New Yorkers, and New Yorkers love our product.'

--Field Level Media