Kalshi Faces Class Action Alleging Involvement In Unlicensed Sports Betting

Source: CoinEdition Original Title: Kalshi Faces Class Action Alleging Involvement In Unlicensed Sports Betting Original Link: https://coinedition.com/kalshi-faces-class-action-alleging-involvement-in-unlicensed-sports-betting/

• Plaintiffs say Kalshi ran unlicensed sports betting disguised as a regulated exchange.
• Suit claims users unknowingly wagered against market makers tied to Kalshi’s affiliate.
• Kalshi denies wrongdoing, calling the allegations competitor-driven and incorrect.

Kalshi Inc. is facing a new legal challenge as seven users of its prediction-market app have filed a proposed class action in New York, alleging that the firm operated unlicensed sports betting markets while presenting itself as a federally regulated exchange. The complaint, submitted on Wednesday, adds to the mounting scrutiny surrounding Kalshi’s sports-related event markets and questions the company’s disclosures about how trading activity is structured on its platform.

According to the filing, Kalshi promoted its sports markets as “legal sports betting” even though it does not hold gaming licenses in any U.S. jurisdiction. The complaint states that customers exercised wagers on outcomes such as NFL game results and player performance totals, which plaintiffs characterize as equivalent to mainstream sports betting products.

The lawsuit further alleges that Kalshi Trading, an affiliated entity, functioned as a market maker and played a central role in establishing pricing that could place users at a disadvantage. Plaintiffs claim that participants often matched against funds provided by a sophisticated liquidity provider rather than other individual users, a structure they argue mirrors betting against “the House.”

Plaintiffs Seek Financial Recovery and Highlight Regulatory Tensions

The seven named plaintiffs are seeking recovery of the money they wagered, as well as the possibility of triple damages. The complaint asserts that sports-related contracts represented nearly 90% of Kalshi’s trading activity in September, contrasting with the company’s broader positioning as a general event-driven exchange. It also alleges that the firm’s activities violated consumer-protection and gambling statutes across more than 30 states and Washington, D.C., including New York, California, and Florida.

The case arrives shortly after a Nevada ruling that gave state regulators authority to pursue enforcement actions involving Kalshi’s sports event markets, adding another layer to the regulatory debate over how such platforms should be categorized.

Kalshi Rejects Allegations and Cites Competitor Influence

Kalshi denied the assertions through a public statement from founder Luana Lopes Lara, who said the lawsuit is a misunderstanding of how event markets operate. She also claimed that competitors are amplifying the allegations. Lara reiterated that the platform is structured as a federally regulated derivatives exchange overseen by the Commodity Futures Trading Commission.

I try to avoid engaging with stupid lies on X, but this is a pure smear campaign. This account, and others, are being paid by our competitor to amplify a baseless lawsuit. The allegations are false and reveal a fundamental (and maybe intentional) misunderstanding of how these…

— Luana Lopes Lara

A similar dispute previously affected Polymarket, which regained the ability to operate in the U.S. after purchasing a derivatives exchange and clearinghouse.