Kalshi’s legal disputes intensify with nationwide class action alleging illegal sports betting
Summary
Kalshi, a CFTC-regulated designated contract market (DCM), is facing intensified legal pressure after a nationwide federal class action filed in the Southern District of New York accused the firm of operating an unlicensed sportsbook. The suit alleges Kalshi and affiliated market-maker entities take positions against customers and partner with hedge funds to provide institutional market making, effectively turning prediction-market contracts into state-regulated sports bets.
Separately, a Nevada court on 24 November dissolved a preliminary injunction that had previously blocked state regulators from acting against Kalshi, with the judge saying Kalshi’s interpretation of commodities law “upsets decades of federalism regarding gaming regulation.” Nevada regulators have indicated they may pursue enforcement actions.
Key Points
- Nationwide class action filed in the Southern District of New York accuses Kalshi of running an illegal sports betting model.
- The complaint alleges Kalshi Trading LLC and KalshiEX (market-maker subsidiaries) take opposing positions to retail users and partner with hedge funds such as Susquehanna for market making.
- Plaintiffs claim around 90% of Kalshi’s September volume was sports-related, estimating roughly $2 billion placed on sports contracts.
- The suit seeks class certification across the US (including New York, California and Florida), recovery of customer losses and the possibility of treble damages and a jury trial.
- A Nevada judge recently dissolved an injunction that had limited state action, signalling state regulators may enforce gambling laws despite Kalshi’s CFTC self-certification.
- Kalshi disputes the allegations, calling the lawsuit a misunderstanding of how DCMs operate and describing the claims as meritless fiction.
Context and relevance
This case strikes at the heart of an ongoing regulatory battle: whether prediction-market sports contracts fall under federal commodities law (CFTC oversight) or state gambling regulations. A ruling against Kalshi could reshape the operating model for US prediction markets, invite state-level enforcement actions, and prompt closer scrutiny of market-making arrangements and institutional partners in the sector.
For operators, platforms and regulators, the outcome will inform how broadly states can regulate event-driven markets and whether firms relying on CFTC classification must change product design, disclosure or market-making practices.
Why should I read this?
Quick take — this one matters if you follow iGaming, prediction markets or regulatory risk. If Kalshi loses, it could ripple across the whole US market and force other platforms to rethink how they run sports markets. We skimmed the legalese so you don’t have to.