Kalshi facing class action lawsuit alleging ‘unlicensed sports betting’

Kalshi, a prediction market that allows users to trade on the outcome of real-world events, has been accused of operating as an unlicensed sports betting platform that misleads consumers into thinking they receive better odds than traditional sportsbooks, according to a class action lawsuit filed in New York federal court on Wednesday.

As reported by Ben Horney of Front Office Sports, the lawsuit was filed on behalf of thousands of potential class members and includes seven named plaintiffs who say they lost money after being deceived. The suit seeks to recover losses from bets placed on the platform and to have a jury trial with the possibility of damages.

“By operating unlicensed sports betting, Kalshi has violated gambling laws, engaged in illegal deceptive activity, and unjustly enriched itself at the expense of tens of thousands of consumers,” reads the complaint.

Kalshi, which counts Donald Trump Jr. as a strategic adviser, allows consumers to trade on contracts based on the outcome of a sporting event. For instance, a customer could put money on who they think will win Thursday’s Thanksgiving game between the Dallas Cowboys and Kansas City Chiefs. In another example, they may be able to “trade” on propositions, such as over/unders. All of this looks like a lot like sports betting to critics, but Kalshi claims that because bettors are wagering against one another, and not the house, they are different from sportsbooks and don’t require things like state gambling licenses.

The lawsuit claims consumers often bet against Kalshi through “market maker” subsidiaries Kalshi Trading LLC and KalshiEx, or hedge-fund partners, like Susquehanna International Group. These subsidiaries “bet against consumers when their bets stray from Kalshi’s internal projected odds,” according to the lawsuit, which also notes “consumers do not realize they are actually being tricked into sports betting against Kalshi.”

While Kalshi claims to be more than sports-focused, the lawsuit alleges that in September, 90 percent of Kalshi’s intake was from “sports betting,” at around $2 billion in bets.

The lawsuit seeks to certify beyond New York and become eligible for a “nationwide” class of consumers.

Kalski has been facing increased scrutiny in recent months. David Purdum and Shwetha Surendran at ESPN reported in June that gambling regulators across the U.S. have ordered them to cease offering sports markets. Still, they have refused, presumably in part due to their connections to President Donald Trump.

Kalshi’s CEO, Tarek Mansour, told Axios in April that he didn’t know what his product “has to do with gambling.”

“If we are gambling, then I think you’re basically calling the entire financial market gambling,” he said.