Kalshi is facing a collective lawsuit from users: operating sports betting without a license? The platform responds that it belongs to the derivation market.

Question

In early December, the American prediction market platform Kalshi ran into trouble.

Seven users teamed up to find a law firm and directly sued Kalshi. Their reasoning is straightforward: you haven't obtained any gambling license from any state, so why are you engaging in sports betting? Even more frustrating is that the platform has packaged this business as “legal sports betting” and promoted it everywhere.

A detail was also revealed in the lawsuit - Kalshi has an affiliated company called Kalshi Trading, which is nominally a market maker, but in reality, the odds set for users are clearly biased towards the platform. In simple terms, users are essentially gambling against the bookmaker, where is there any fair trading?

Kalshi is not backing down either, responding directly: We operate in the derivatives market, not the kind of gambling you refer to. Moreover, we only accept federal regulation from the CFTC (Commodity Futures Trading Commission), state gambling licenses? Not needed.

This case is still in the stage of wrangling, but it has brought up the old question of whether the prediction market counts as gambling.

APY_Chaser · Accepted Answer

Wait, that's not right. Derivatives market? Then why are the odds still in favor of the house? Isn't this just gambling against each other?

UncleLiquidation · Answer

I&#39;ve seen this trap before, just trying to wash it white with a different disguise, derivation market? Forget it.

Market makers always win, that&#39;s not news.

Kalshi Trading&#39;s move is indeed brilliant, nominally a market maker but actually a bet, with odds that make them look good, players are just suckers being slaughtered.

Wait for the judgment, the regulation in this area is too deep.

If the CFTC can really handle this, I&#39;ll live stream eating a keyboard.

Web3Educator · Answer

nah this is just regulatory arbitrage dressed up fancy... kalshi banking on cftc grey area while users eat the odds, classic move tbh

SignatureVerifier · Answer

ngl the regulatory arbitrage play here is textbook insufficient validation... technically speaking, claiming "derivatives market" while odds structure systematically favors the house? that's just semantics dressed up as compliance. requires further auditing on their actual market mechanism design tbh

LiquidatedThrice · Answer

Wow, I&#39;ve seen this trap before, trying to fish in troubled waters just by changing the name? Derivation market... sounds tough.

Users bet against the market maker and still have the nerve to say it&#39;s fair, made me laugh so hard.