New York Attorney General Letitia James (D) sued prediction market platform Kalshi on Friday, accusing the federally regulated exchange of operating an illegal gambling business in the state, escalating a growing legal battle over whether prediction markets fall under state gambling laws or exclusive federal oversight.

The lawsuit seeks to block Kalshi from continuing to offer its contracts in New York, arguing the company has repeatedly violated state gaming laws by allowing users to wager on everything from elections to the weather.