Letitia James can’t find time to prosecute Medicaid fraud in New York. She has, though, found time to sue a federally regulated financial exchange.

The New York attorney general’s office ranked dead last in the country for Medicaid fraud prosecutions and lost $60 million in annual federal funding as a result.

Despite this, James filed a lawsuit Friday against Kalshi, the nation’s largest prediction market platform, accusing it of running an “illegal gambling business” in the state of New York.

The Commodity Futures Trading Commission has regulated Kalshi as a designated contract market since 2020. It is a federally licensed exchange operating under federal law. James’s lawsuit argues the state can override that federal framework, accusing Kalshi of repeatedly violating New York’s gaming laws by allowing users to trade contracts on elections, sporting events, and weather outcomes.

“Rather than seek reasoned answers from the courts, Letitia James and New York seek to force an unprecedented sudden shutdown of prediction markets nationwide,” said CFTC Chairman Michael Selig on Friday. He promised his agency would “continue to defend its jurisdiction.”

The lawsuit arrives at an awkward moment for James, who is under active federal scrutiny. The FBI opened an investigation into alleged mortgage fraud claims against her in May 2025. A DOJ grand jury was convened to investigate her in August 2025. She pleaded not guilty to charges that she defrauded her mortgage lender in October 2025.

House Oversight Committee Chairman James Comer has also opened a congressional investigation into Kalshi, but his concerns centered on insider trading and regulatory gaps after Kalshi expanded to 140 countries, not on whether the platform itself is illegal.