“This is by far the biggest Iranian illegal gambling network ever discovered and one of the biggest in the world,” said John Wojcik, a former researcher at Infoblox and now senior analyst at TRM Labs, who spent seven years investigating illegal gambling for the United Nations Office on Drugs and Crime.

It is also one of the largest Iranian sanctions-evasion networks discovered since 2016, when the U.S. broke up a roughly $20 billion IRGC gold-for-oil operation based in Turkey. Separately, the U.S. seized $1 billion in crypto from Iran in May.

“It’s an IRGC operation, and that’s plain as day,” Rich Sanders, an independent blockchain researcher and investigator focused on Iran, said of Shelbit. Reuters said it could not determine whether the IRGC directly controlled Shelbit or the gambling network.

The IRGC, founded in 1979, is the country’s most powerful and influential military, political and economic institution that answers directly to the country’s supreme leader, Mojtaba Hosseini Khamenei.

Shelbit also interacts directly with Iran’s central bank, wallets linked to the IRGC by the Israeli government, and Nobitex, an Iranian exchange that the U.S. government sanctioned earlier this year after a Reuters investigation revealed its ties to the government. Some of the crypto flowing to Shelbit came from what the two investigative firms described as an Iranian bitcoin mining operation that creates new digital coins.

Traders have no way to react to events after markets close on TradFi venues. Perps on the other hand run 24/7. The Iran conflict was reflected in oil perps on Hyperliquid before CME reopened. Perps offer a continuously running, efficient market in a simple interface. Futures and options come with expiry dates, complicated greeks and interfaces. Perps remove all of that while keeping the speculative upside potential intact.

Martin Lee is Market Insights Lead of DWF Labs, one of the most active market makers and investors in digital assets.

Derivatives always outgrow spot

Derivatives volumes always outgrow their underlying spot market. It’s what we see in equities, commodities and crypto. RWAs are following the same trend. Equity perp volume on Hyperliquid ran 13-20x tokenized equity spot volume between March and May 2026.

You could argue that the number of traders matter more, a metric that spot usually wins out across most markets (except commodities). Looking into the numbers, tokenized equities have the bigger base: 180,845 wallets against 24,378 for equity perps. But perp holders are compounding at roughly 33% a month against spot’s 17%. Even in the domain where spot dominates, perps are rapidly closing the gap.

Perps innovate faster

The biggest factor driving the acceleration is the rapid rate of experimentation that RWA perps are able to have. Launching tokenized assets takes much longer and is more legally complex than launching a new perp market. The ease of launching perp markets creates opportunities for novel synthetic markets to be spun up. Markets that unlock fresh opportunities that didn’t exist before. A true 0 to 1 moment.

Ken Griffin’s Citadel has reportedly stepped in to buy a large portion of the publicly traded stock portfolio of Situational Awareness, the hedge fund run by former OpenAI researcher Leopold Aschenbrenner. The deal comes after steep losses tied to last month’s broad selloff in AI-linked equities.

According to the Financial Times, Citadel purchased the discounted portfolio after Situational’s performance deteriorated in July’s AI stock rout. Earlier reporting from The Wall Street Journal indicated Situational fell about 67% during July, even as it was still up roughly 80% for the year at the time of a letter sent to investors.

Key takeaways

• Citadel reportedly bought much of Situational Awareness’s publicly traded equity portfolio after major July losses in AI-linked stocks.
• Reports cite liquidity pressure, including the need to handle lender margin calls, though Reuters could not confirm whether formal margin calls were issued before certain share sales.
• SEC filings show Situational held public stakes in AI-adjacent names such as Sandisk, CoreWeave-related exposure, and Bloom Energy as of March 31, alongside a sizable Bitcoin mining share portfolio.
• It remains unclear which exact holdings were included in the Citadel transaction and whether any of the miner positions were retained.

From AI selloff to portfolio sale

The reported acquisition follows a sharp equity drawdown that hit hedge funds concentrated in AI infrastructure and related trades. The Financial Times said Citadel bought the portfolio at a discount after Situational Awareness suffered heavy losses during July’s AI stock market rout.

The sequence of events described by major outlets suggests liquidity became the limiting factor. The Wall Street Journal reported that Situational needed cash to meet margin calls from its lenders. In that account, the fund agreed late Wednesday to sell $3.5 billion of Anthropic shares to a group led by Greenoaks and Sequoia Capital, but then withdrew from the deal after agreeing terms for a Citadel-led portfolio transaction.

Reuters separately reported that Citadel bought most of Situational’s stock holdings after the AI share rout and described details of the leveraged portfolio and share sales. Reuters also stated it could not determine whether formal margin calls had been issued before the Anthropic-related sale discussions. Reuters added that Situational retained about $10 billion in stocks and private investments, including exposure to Anthropic.

What July losses looked like in holdings

Several stocks connected to Situational Awareness’s portfolio reportedly dropped sharply during July. Yahoo Finance data cited in the coverage shows Sandisk down about 44% for the month even after closing Thursday up 26%. CoreWeave was down nearly 26% in July, while Bloom Energy fell around 32%, according to the same dataset.

While those monthly declines underline how concentrated positions can magnify market stress, they also illustrate why a portfolio sale at “discounted” terms can become attractive to a counterparty—particularly when pricing dislocations occur across an entire thematic trade rather than a single company-specific issue.

SEC filings point to AI infrastructure and Bitcoin mining exposure

Situational Awareness’s U.S. Securities and Exchange Commission filing reportedly shows direct share positions in at least three companies—Sandisk, CoreWeave, and Bloom Energy—as of March 31. The SEC document is used to ground the public-equity portion of the story, including what was held before July’s drawdown.

The same filing also showed approximately $1.11 billion in shares of seven Bitcoin (BTC) mining companies, including Iren, Core Scientific, Riot Platforms, and CleanSpark. Cointelegraph previously reported that the strategy involved miner exposure that could benefit from demand for AI and high-performance computing by repurposing power supplies and data center sites.

In this round of reporting, however, the critical open question for investors is scope: it is not clear which specific stocks were included in the Citadel transaction, and it remains uncertain whether Situational retained any of its Bitcoin miner positions after the sale of the public stock portfolio.

Why the trade may signal shifting leverage risk

Across hedge fund industry coverage, the theme in situations like this is rarely the long-term thesis of an investor—it’s how leverage and collateral requirements interact with fast-moving equity markets. The reporting around margin calls and the need for cash suggests the fund’s ability to keep positions through volatility was constrained.

At the same time, the asymmetry between what is publicly visible and what is financially decisive remains. Reuters’ note that it could not confirm whether formal margin calls had been issued before certain transactions highlights the limits of what outsiders can verify in real time—especially when term sheets, lender discussions, and collateral mechanics are involved.

For readers tracking crypto-adjacent strategies, the story also underscores that “AI” and “crypto infrastructure” exposures are increasingly intertwined. Situational’s reported combination of AI-linked equity holdings and Bitcoin miner stock exposure reflects a broader market reality: demand for power, computing, and deployment of infrastructure can connect traditional equity investing, AI narratives, and crypto mining businesses.

Watch items after the reported deal

Investors should watch for further clarity on which holdings Citadel acquired, whether Situational retained any miner positions, and how the fund’s remaining $10 billion of reported stocks and private investments evolve after July’s volatility. Until additional filings or confirmations arrive, the practical takeaway remains straightforward: when leverage meets thematic drawdowns, portfolio exits can happen quickly—even for funds that may still look strong over a longer time horizon.

The state is seeking at least $36 billion in damages from the prediction market platform it calls an unlicensed gambling operation, and has filed for a temporary restraining order to halt its contracts immediately.

The lawsuit that prediction markets knew was coming

Two days after the Second Circuit denied Kalshi emergency relief on July 29, New York filed the most aggressive state action yet against the prediction market industry. The suit arrived with a coordinated announcement from AG James and Governor Hochul, counts spanning multiple bodies of state law, a $36 billion damages demand, and a motion for an immediate restraining order.

The $36 billion figure, reported by The Block based on the court filings, is roughly 1.6 times Kalshi’s reported valuation. It is the number every major outlet is leading with, and it signals that New York is treating this as a revenue-extraction case, not merely a cease-and-desist.

This piece examines the filing, the legal arguments on both sides, the federal regulator caught between them, and what the case means for an industry now fighting a war on two fronts: in courtrooms and in Congress.

What the complaint actually alleges

The core claim is straightforward: Kalshi is running an unlicensed gambling business in New York.

The AG’s office says the platform lets users place wagers on uncertain future events, from Super Bowl outcomes to reality TV winners to election results, without a Gaming Commission license and without paying state gaming taxes. New York treats these as bets, not derivatives, regardless of Kalshi’s CFTC registration.

The complaint goes further. It alleges Kalshi allows users aged 18 to 20 to place bets, violating New York’s 21-and-older minimum for mobile sports betting. It alleges the platform offered wagers on games involving New York college teams, a separate violation under state law.

The AG’s investigators placed test wagers from New York accounts as evidence: four “Yes” contracts on a UConn-Michigan basketball game at $1.14 in April 2026, and ten contracts on the winner of “Big Brother” in July 2026. Both transactions completed without obstruction.

The filing also introduces a count under the federal Interstate Wire Act, alleging Kalshi used wire communications to transmit bets across state lines. This is significant because it widens the legal exposure beyond state gambling statutes into federal criminal law, giving the state an argument that operates independently of the preemption question. Even if Kalshi’s CFTC registration were found to preempt state gambling law, the Wire Act is a federal statute, and the state is arguing that Kalshi violates it.

The complaint details the investigative methods in unusual specificity. Rather than relying on industry reports or third-party data, the OAG built its case from the inside. Investigators created accounts, placed real wagers, and documented each step. This matters for the TRO motion: the state can present firsthand evidence that illegal gambling is actively occurring in New York, not merely that it could occur.

“Prediction markets like Kalshi are gambling platforms, plain and simple,” James said in a statement accompanying the filing.

Governor Hochul framed the action around consumer protection, saying Kalshi “has chosen to ignore New York’s gaming laws, which exist to protect consumers, prevent problematic gambling, deliver funding for critical public services, and ensure that every company plays by the same rules.” The coordinated announcement from both the AG and the Governor signals that this is not a routine regulatory action. It is a political priority.

The $36 billion in damages and the TRO

New York is not seeking a slap on the wrist. The headline number is at least $36 billion in compensatory damages, pending a full accounting of Kalshi’s operations. The remedies demand:

• A permanent injunction barring Kalshi from operating unlicensed gambling in the state
• A temporary restraining order halting Kalshi’s event contracts in New York immediately
• A full accounting of every customer bet and loss processed through the platform
• Forfeiture and disgorgement of all gains the state deems illegal
• Restitution to affected consumers
• Penalties of three times Kalshi’s gains under Penal Law Section 80.10
• A fine of $100,000 per unauthorized sports wagering offer under the Racing Law

The TRO is the near-term threat. If granted, Kalshi would need to suspend operations in New York while the case proceeds, potentially for years. The triple-damages provision is the long-term one. At $36 billion, New York is claiming a figure that exceeds the platform’s reported valuation of $22 billion by more than 60%.

The per-offer fine structure adds another layer. The AG’s release notes that Kalshi users bet over $1 billion monthly in 2025, with 90% of that volume on sports. Each unauthorized sports offering carries a $100,000 fine under the Racing Law. At that volume, the per-offer penalties alone could produce a figure in the hundreds of millions.

The damages calculation itself reveals the state’s theory of the case. New York is not treating Kalshi as a minor regulatory violator that failed to file paperwork. It is treating Kalshi as a gambling operation that processed billions in unlicensed wagers over multiple years, and it wants the full economic benefit of that activity returned. The $36 billion figure presumably reflects the total volume of wagers placed by New York users, or a substantial fraction of it, multiplied by the treble-damages provision. The final number will depend on the full accounting the state is requesting, but the opening demand is meant to establish the scale of the alleged violation.

The TRO motion deserves separate attention because it operates on a different timeline from the main case. A TRO hearing can happen within days or weeks, while the underlying lawsuit could take years. If New York secures the restraining order, Kalshi faces an immediate operational decision: comply and lose the New York market, or challenge the order and risk contempt proceedings. Either outcome sets a precedent that other states can follow. Michigan and Nevada secured their own TROs through similar procedural mechanisms, and each one reduced Kalshi’s geographic footprint.

The $1 billion monthly number and why it matters

The AG’s release includes a figure that has received less attention than the $36 billion headline: Kalshi users bet over $1 billion every month on the platform in 2025, and 90% of that money went to sports betting.

This is the number that makes the bipartisan Senate proposal to ban CFTC-licensed platforms from offering sports event contracts existential. Sports are not a side product for Kalshi. They are the product. If sports contracts are removed, whether by state enforcement or federal legislation, the platform loses nine-tenths of its recorded consumer activity.

The figure also undercuts Kalshi’s framing of its offerings as sophisticated financial derivatives. A billion dollars a month on the Super Bowl, the NBA, and college basketball looks like a sportsbook by any name. New York is making exactly that argument, and the AG’s investigators have the receipts.

The concentration matters for investors and market participants as well. Kalshi’s $22 billion valuation implies a diversified event-contract platform serving a range of use cases: elections, weather, economics, entertainment. The AG’s data shows something closer to a sports gambling platform with a derivatives label. If the valuation was underwritten on the assumption of product diversity, the 90% sports concentration represents a disclosure risk independent of the legal outcome.

Kalshi’s federal preemption defense

Kalshi’s position rests on a single legal premise: that its 2020 registration with the CFTC as a designated contract market means its event contracts are regulated derivatives under the Commodity Exchange Act, subject to exclusive federal oversight.

The company calls the suit “political theater” and argues states cannot simply shut down a federally licensed exchange. The framing is deliberate. Kalshi wants this treated as a jurisdictional question, not a gambling question.

It is the strongest version of their argument, and it carries legal weight. The CFTC itself has backed the position, filing lawsuits against multiple states and claiming exclusive regulatory authority over prediction markets. On the same day New York filed its suit, the CFTC filed an emergency counter-motion in Manhattan federal court less than one hour before the state complaint dropped, attempting to reassert federal jurisdiction preemptively.

The federal regulator has now challenged state enforcement in at least nine states, including filing suit against Arizona, Connecticut, and Illinois in April 2026. The CFTC is not a passive bystander in this dispute. It is an active combatant on Kalshi’s side.