Kalshi, the prediction market platform, faces a class-action lawsuit: is it derivatives trading or unlicensed gambling?

Question

The prediction market of 【区块律动】 has had some issues recently. On December 1st, Kalshi was sued in court by seven users, and this matter has caused quite a stir.

Users have hired the law firm Lieff Cabraser Heimann & Bernstein as their representatives, with two main accusations: first, the platform has not obtained any gambling licenses from any state to conduct sports event betting; second, their associated market maker Kalshi Trading manipulated the odds, making users actually bet against the “dealer,” and packaged this as “legal sports betting” to promote everywhere.

What does Kalshi say about this? Their response is quite interesting - what we do is derivatives trading, not gambling. According to their logic, it is enough to be regulated by the CFTC (Commodity Futures Trading Commission), a federal agency; as for state-level gambling licenses? That has nothing to do with us.

This controversy is actually quite typical: is it a financial derivative or a disguised form of gambling? Where is the boundary drawn for regulation? It probably depends on how the court rules.

InscriptionGriller · Accepted Answer

Derivations and gambling, these two terms are like two grasshoppers on one rope in American law. Kalshi&#39;s method is no different from playing people for suckers with a different name; the CFTC&#39;s regulation can&#39;t cover this matter.

PretendingSerious · Answer

It&#39;s just a trick to show off concepts; derivation is still gambling, ultimately it depends on how the court rules.

WinterWarmthCat · Answer

This is just another "We are financial derivations, not gambling" rhetoric, and if we&#39;re not careful, we could get judged.

SignatureVerifier · Answer

ngl, kalshi&#39;s "derivatives" classification feels like semantic gymnastics when you really audit the mechanics... technically speaking, insufficient distinction between outcome betting and financial instruments here. We need to take a closer look at their contract design tbh.

potentially_notable · Answer

Here we go again, derivation is still gambling, these two are like brothers...

ChainMaskedRider · Answer

Haha, this is just gambling disguised as derivation, and CFTC regulation can&#39;t change its essence.

SchrodingerAirdrop · Answer

Hmm... derivation is still gambling, to put it bluntly, it depends on how the regulatory authority judges it.