New Delhi, July 31 -- NEW YORK - New York Attorney General Letitia James and Governor Kathy Hochul filed suit against Kalshi on Thursday, calling the federally regulated prediction market "a gambling platform, plain and simple" and seeking up to $36 billion in civil penalties, the highest-stakes legal challenge yet to the booming events-contracts industry.

The federal response came within hours. The Commodity Futures Trading Commission, which licensed Kalshi in 2021 and has spent the past year suing states that tried to shut it down, filed for an emergency temporary restraining order to block New York from proceeding. Whether a federal court grants it, and how quickly, will determine whether Kalshi continues operating in the country's la...