TechFlow, Dec 1 — Bloomberg reported that prediction market platform Kalshi Inc. is facing a class-action lawsuit accusing it of operating illegal sports betting without any state gaming licenses and misleading customers about its market-making activities. The lawsuit was filed by seven users of the Kalshi app, who claim the company falsely advertised its services as "legal sports betting."
The complaint further alleges that Kalshi's affiliate, Kalshi Trading, acting as a market maker, sets odds unfavorable to customers, effectively making consumers bet against the "house." Kalshi maintains that it operates a derivatives market subject only to federal oversight by the Commodity Futures Trading Commission (CFTC).
This is the latest in a series of legal challenges facing Kalshi. Earlier, a federal judge in Nevada ruled that the company should be subject to state regulation, stating that "event contracts based on sports outcomes fall outside the exclusive jurisdiction of the CFTC." Currently, at least five courts across the U.S. are handling disputes over the regulatory boundaries between prediction markets and state gambling laws.
