Prediction market platform Kalshi is facing a nationwide class action lawsuit alleging it operates an unlicensed sports betting platform that deceives consumers into believing they are wagering against other users when they are actually betting against the house.
Seven plaintiffs brought the lawsuit on Wednesday in the US District Court for the Southern District of New York on behalf of potentially thousands of consumers. The named plaintiffs are Crystal Pelayo, Jacob Tingle, Isaiah Esquibel, Gino Gadaleta, Brice Gambill, Raleigh Melancon, and Micah Parker.
The complaint alleges Kalshi violated gambling laws in multiple states, including New York, California, and Florida, by classifying sports bets as “event contracts” to operate without required gaming licenses. The lawsuit seeks to recover money wagered on the platform and requests a jury trial with potential treble damages.
According to the filing, approximately 90% of Kalshi’s platform volume in September came from sports betting, totaling roughly $2 billion in wagers. The complaint asserts that Kalshi’s affiliated entities, including subsidiaries Kalshi Trading LLC and KalshiEx, as well as institutional partners like Susquehanna International Group, frequently serve as counterparties to consumer wagers instead of the platform facilitating peer-to-peer betting as advertised.
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The complaint further alleges that Kalshi targets underage users through sponsored influencers, including one who is 15 years old. It also cites Kalshi’s September announcement of partnerships with college clubs through “KalshiU” aimed at recruiting the next 100 million users.
A Kalshi spokesperson dismissed the lawsuit as “meritless fiction,” telling Front Office Sports that it demonstrates fundamental misunderstandings about how federally regulated designated contract markets operate.
Earlier this week, a federal judge in Nevada ruled that state gaming regulators can proceed with efforts to halt Kalshi’s sports event contracts. The New York State Gaming Commission previously sent Kalshi a cease-and-desist letter ordering it to stop operating what the commission characterized as an unlicensed mobile sports betting platform.
Kalshi, which holds a Commodity Futures Trading Commission license to operate a derivatives exchange, argues that federal regulation preempts state authority. The company has filed lawsuits against gaming regulators in multiple states, including Nevada, New Jersey, Maryland, and Ohio.
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