Kalshi's growing legal challenges

Kalshi's legal disputes are intensifying, with a New York class action that claims it has deceived thousands of consumers into using its “illegal sports betting platform.”

The development adds to a recent Nevada ruling challenging the prediction market operator’s position that its sports event contracts fall under federal commodities regulation rather than state gambling control.

Regulatory status and Nevada court ruling

Kalshi operates as a designated contract market (DCM) regulated by the Commodity Futures Trading Commission (CFTC). The company maintains that its “trading” activity is within the federal commodities framework and not subject to state gaming laws. Kalshi has self-certified its sports contracts with the CFTC.

However, a recent Nevada court decision rejected that premise. On November 24, US District Judge Andrew Gordon dissolved a preliminary injunction granted earlier this year, which had temporarily barred Nevada regulators from acting against the company. The judge ruled that Kalshi’s interpretation of commodities law “upsets decades of federalism regarding gaming regulation” and conflicts with congressional intent under the Commodity Exchange Act.

Nevada regulators have stated they may take enforcement action against companies offering what they regard as unlawful sports betting.

Class action accuses Kalshi of operating a sportsbook model

Alongside the Nevada ruling, Kalshi is now facing a nationwide federal class action filed in the Southern District of New York, accusing the company of operating unlicensed sports gambling.

The lawsuit argues that consumers “do not only bet against each other—they also bet against the House,” claiming that market maker subsidiaries Kalshi Trading LLC and KalshiEX take opposing positions to customers when trading diverges from Kalshi’s internal projected odds. The complaint further alleges partnerships with hedge funds, including Susquehanna International Group, to provide institutional market making.

According to the filing, market makers are positioned to profit when consumers lose. It further alleges that “consumers do not realize they are actually being tricked into sports betting against Kalshi.” The suit seeks recovery of customer losses and requests a jury trial with the possibility of treble damages.

Sports contracts and platform volume

Although Kalshi offers a variety of event-driven markets, plaintiffs claim the activity resembles traditional betting. Examples listed in the suit include wagers on NFL game winners and whether specific players exceed performance thresholds.

The complaint states that in September, 90% of Kalshi’s volume involved “sports betting,” estimating about $2 billion in bets placed on sports contracts. Plaintiffs seek to certify a nationwide class and subclasses for 30 states and Washington, D.C., citing alleged violations of state gambling and consumer-protection laws in New York, California, Florida, and others.

Kalshi’s response to the allegations

Kalshi rejects the allegations. “This lawsuit demonstrates many fundamental misunderstandings about how federally regulated DCMs operate,” a spokesperson told Front Office Sports. “Anyone who understands how Kalshi works will see it for what it is—meritless fiction. We look forward to responding further in our court filings.”