- Prediction market Kalshi faces a class action lawsuit alleging it operates an illegal sports betting platform without a license.
- The platform markets sports wagers as “event contracts” even in states where sports betting is illegal.
- In September 2025, over $2 billion was wagered on Kalshi’s sports betting markets.
- The New York State Gaming Commission demanded Kalshi stop its unlicensed sports betting in New York.
- The lawsuit claims Kalshi disguises traditional sports bets under terms like “sports trading” and “build your combo.”
A class action lawsuit has been filed against the prediction market Kalshi, accusing it of running an unlicensed and illegal sports betting platform. The suit alleges that since January 2025, Kalshi, headquartered in New York, labeled sports wagers as “event contracts,” allowing bets in states where online sports betting is prohibited. Plaintiffs argue that consumers are misled into believing they are betting against other users, while in fact they bet against the house.
The suit, brought in the Southern District of New York, states that in September 2025, more than $2 billion was wagered by U.S. bettors on Kalshi‘s sports betting markets. It claims that 90% of the platform’s volume that month consisted of sports bets. The New York State Gaming Commission sent a cease-and-desist letter earlier, demanding that Kalshi stop its unlicensed sports betting operations within the state.
Plaintiffs including Crystal Pelayo and Jacob Tingle say Kalshi markets its offerings with ads encouraging users to “Bet on the NFL” and claims legality in all 50 states. The complaint alleges that these bets are materially similar to those made at casinos or sportsbooks, despite being presented as unique contracts. The suit further charges that Kalshi has enriched itself unlawfully at the expense of millions of consumers.
Initially, Kalshi started as a platform offering binary yes/no event contracts, such as betting on economic events, and distinguished itself by charging transaction fees rather than profiting from customer losses. However, beginning in 2024, the company expanded to political election betting and then shifted focus in 2025 to sports betting. The lawsuit contends that Kalshi adopted alternative terms such as “sports trading” and “build your combo” to camouflage traditional sports betting products, including parlays and proposition bets.
The plaintiffs have requested a jury trial on all claims. More details about the case and related topics can be found in the original court filing at this link.
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