James sued Mashinsky in 2023 over claims he misled hundreds of thousands of depositors, including more than 26,000 New Yorkers, about how safe their money was on the crypto lender. Per the attorney general’s office, the $35 million figure splits into two conditional payments. The first condition is that if Mashinsky fails to forfeit $10 million in ill-gotten gains to the federal government, on top of assets already surrendered, he will owe the state $25 million. The other $10 million that brings the total to $35 million only comes into play if Mashinsky does not serve his full prison term.

New York sets $35M penalty condition in Mashinsky’s case

Mashinsky’s federal plea already has a forfeiture order of $48,393,446, per the court stipulation filed in the case. If he forfeits that amount and completes his sentence, nothing goes to New York. So, for the state to receive any of that penalty, Mashinsky would have to default on commitments he made to avoid a longer sentence. New York is not the only state/body that has slammed Mashinsky with a form of restriction.

The Federal Trade Commission (FTC) entered a suspended $4.7 billion judgment and required Mashinsky to pay $10 million as part of the settlement. It then imposed an 18-year reporting regime while cutting him off from crypto and financial services. In June, the Commodity Futures Trading Commission (CFTC) added permanent trading and registration bans through a court consent order. Mashinsky is serving 144 months in jail, a 12-year sentence that was handed down in May 2025 after he pleaded guilty to commodities fraud and manipulating the price of Celsius’s CEL token.

Mashinsky’s book with regulators is not yet fully closed, as the lawsuit that the Securities and Exchange Commission (SEC) filed against him in July 2023 over an alleged unregistered securities offering and CEL price manipulation is still reportedly open. The agency told a federal court it had “engaged in substantive settlement discussions” with him in late May, with no agreement reached and the court granting another 60 days to keep talking.

Mashinsky may be facing another lifetime ban if the SEC settles on the same terms as the other agencies. The events that led to the series of rulings and lifetime bans started in June 2022 after Celsius froze withdrawals on its platform. A month later, it filed for Chapter 11, wiping out deposits made by users who were treating it as a savings account. Since then, creditors have received more than $3.4 billion through the bankruptcy proceeding as of August 2026. James said in a statement, “I will not allow scammers to use cryptocurrencies to prey on unsuspecting New Yorkers.”

The post New York slams ban and $35M penalty on Alex Mashinsky first appeared on Coinfea.

According to reports, New York argues that its case, brought in a verified petition filed in the New York Supreme Court under Executive Law 63(12), is that a Kalshi customer risks money on an unpredictable outcome over which they have no control and is paid if it comes to pass. That’s the legal definition of gambling, the Attorney General’s Office says. “No matter what they call themselves, prediction markets like Kalshi are gambling platforms, plain and simple,” James said in the announcement. The petition claims that by not getting a license from the New York State Gaming Commission, Kalshi avoided the ~51% tax that licensed mobile sportsbooks pay.

New York argues against the nature of Kalshi’s bets

According to the state, the money involved funds schools and problem-gambling programs. The filing also cites Kalshi’s own numbers, a claimed $22 billion valuation, and $178 billion in annualized transaction volume. The Attorney General’s staff seem to have used the platform as proof. The investigators wagered from New York accounts. They bought four “yes” contracts on a UConn-Michigan basketball game for $1.14 in April and 10 more on the winner of Big Brother in July.

New York also said Kalshi took bets on New York college teams, citing a Siena-Duke matchup that is off-limits even to licensed sportsbooks. It says Kalshi let people between the ages of 18 and 20 trade even though the state requires people to be at least 21 to bet on sports. The Attorney General’s Office said that exposing that age group to online gambling involves long-term psychological and financial risk. The petition seeks $100,000 for each unauthorized sports-wagering offer under the Racing Law.

In addition, the state is also seeking disgorgement and triple-damages demand under Penal Law 80.10. The court has not tested any of those claims, and it has not found Kalshi liable. Aside from the state gambling charges, New York says Kalshi has violated the federal Interstate Wire Act, which bars the use of wires to transmit bets across state lines. Since 2020, Kalshi has claimed that its event contracts are federally regulated derivatives, not wagers.

The platform has argued that because it is a designated contract market registered with the Commodity Futures Trading Commission, it is therefore not subject to state gambling law. By reaching for a federal criminal statute, New York is fighting on Kalshi’s turf. The CFTC claims exclusive authority over these markets and has sued New York and several other states to assert it. On July 29, a Second Circuit judge denied the company’s request for emergency relief and referred its motion for an injunction to a three-judge panel.

The ruling left Kalshi vulnerable after a penalty pause New York had granted in October 2025 had expired. That dispute dates back to October, when Kalshi sued New York officials to stop the Gaming Commission’s cease-and-desist order. Analisa Torres, a U.S. District Judge, denied Kalshi’s injunction on July 7, ruling that the federal Commodity Exchange Act does not preempt New York’s gambling laws with respect to Kalshi’s sports-event contracts, Cryptopolitan reported.

Torres wrote that the state’s interests in curbing gambling addiction and protecting sports integrity “heavily” outweighed the company’s federal-preemption case, and added that courts across the country remain split on the question. Kalshi is appealing that ruling. James, in April, sued Coinbase Financial Markets and Gemini Titan on the same theory, saying their event-contract products are unlicensed gambling. Coinbase moved its case to federal court within a day, making the same federal-question argument that Kalshi is making.

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