Kalshi faces a class action lawsuit for illegal gambling and misleading customers

According to Bloomberg, the prediction market platform Kalshi Inc. has recently faced a class-action lawsuit, accused of illegally operating a sports betting business without any state gambling licenses and misleading customers about its market-making activities. The lawsuit was filed by seven users of the Kalshi app, claiming that the company falsely asserted it offered "legal sports betting" services.

The lawsuit also alleges that Kalshi's affiliated company, Kalshi Trading, acted as a market maker, setting unfavorable odds for customers, effectively making consumers bet against the "house." Kalshi, however, insists that it operates as a derivatives market, solely regulated by the Commodity Futures Trading Commission (CFTC).

This is the latest in a series of legal challenges facing Kalshi. Previously, a federal judge in Nevada ruled that the company should be subject to state regulation, stating that "event contracts based on the outcomes of sporting events do not fall within the exclusive jurisdiction of the CFTC." Currently, at least five courts across the United States are handling disputes between prediction markets and state gambling regulations.