Class Action Lawsuit Claims Kalshi Illegally Runs Online Sports Betting Platform

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A proposed class action lawsuit claims that Kalshi operates an unlicensed online sports betting platform, including in states where sports gambling is illegal.

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The 42-page lawsuit alleges that Kalshi’s platform invites players to engage in what the company calls a “prediction market,” where participants buy and sell “event contracts.” The suit argues that Kalshi’s event contracts are essentially bets, as they involve the exchange of items of value based upon an outcome over which the betting parties have no control.

Per the complaint, Kalshi incorporated sports “contracts” into its platform in January 2025, and by September of that year, not only had it expanded its contracts to mirror more traditional sports betting styles, but 90 percent of the company’s total volume was from sports betting.

The filing alleges that Kalshi’s sports categories are functionally indistinguishable from traditional sports betting, which is illegal in several of the states in which the company operates. Despite this, the suit says, Kalshi advertises that its services are completely legal in all 50 U.S. states, and runs ads specifically promoting its platform as a legal form of sports betting.

Examples in the complaint include one ad that announces, “…[Y]ou can legally bet on NFL in all 50 states using Kalshi,” and another ad, formatted to look like a news article, claiming, “Breaking news: Sports betting in California is now legal[.] New York-headquartered prediction market Kalshi has legalized sports betting in all 50 states.”

Additionally, the lawsuit alleges that Kalshi participates in the betting itself via subsidiaries Kalshi Trading and KalshiEX, or through partnered hedge funds such as Susquehanna International Group.

These subsidiaries and hedge funds, per the suit, “bet against consumers when their bets stray from Kalshi’s internal projected odds,” effectively forcing players to bet against the house, which the lawsuit claims has control of the betting market, insider knowledge and superior research and predictive technologies. The complaint argues that this allows Kalshi, like any other traditional sportsbook with house betting, to tip the odds consistently in its favor, reducing its own financial risk and draining even more money from consumers, who believe that they are fairly betting against other consumers.

The filing alleges that Kalshi only ever advertises itself as a “peer-to-peer market,” and thus distinct from a sportsbook, with its co-founder claiming that “Kalshi doesn’t win when our customers lose, which creates a fair, transparent environment for people to trade.”

Per the lawsuit, Kalshi’s official Reddit account also stated, “[W]e’re a free market, not a book. We don’t set the odds, we open a market and let people trade on it, and where the market settles is what the odds are. This is important because it means we’re not profiting off of people from vig [fees charged on accepted wagers]… Sportsbooks are a business, but we’re a business and a public good.”

However, the suit argues that Kalshi’s entire business model is predicated on “win[ning] when its customers lose,” and that it is actively lying to consumers about the nature of its “market” and the fairness of any bets, in addition to its alleged illegality in certain states.

The alleged illegality also means, per the complaint, that Kalshi’s platform is entirely unregulated. The lawsuit alleges that, due to the apparent lack of guiding regulations, Kalshi has been able to intentionally engage in predatory advertising techniques, campaigns and partnerships, including failing to disclose during signup that the platform involves gambling or that users will be betting against the house, partner programs with college clubs, and sponsoring a 15-year-old gaming influencer.

The suit argues that Kalshi’s intense focus on marketing to a young demographic, especially given that it allegedly lacks any real regulation or safeguards, is particularly concerning given the addictive potential of gambling and the often destructive effects of gambling addiction.

The Kalshi class action lawsuit seeks to represent anyone in the United States who spent money by wagering on Kalshi’s mobile or web platforms.

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