CFTC-Regulated Kalshi Faces Class Action Over Alleged Illegal Sports Betting
Kalshi, a prediction markets platform regulated by the CFTC, is now embroiled in a nationwide class action lawsuit filed in the Southern District of New York. The suit alleges the company's event contracts constitute illegal, unlicensed sports betting, bypassing state gambling laws.
Plaintiffs claim Kalshi misled users by presenting its platform as legal peer-to-peer wagering when it allegedly operates as a house-betting model. The case escalates existing regulatory disputes into private liability territory, exposing Kalshi to substantial financial risk beyond potential regulatory penalties.
The litigation centers on whether Kalshi's contracts—tied to athletic event outcomes—represent unlawful gambling under state laws or permissible financial instruments under federal oversight. This jurisdictional clash could set precedents affecting other prediction markets.
