Kalshi is facing substantial legal pressure after a proposed nationwide class action lawsuit accused the company of operating an unlicensed sports betting platform while presenting itself as offering better odds than traditional sportsbooks.
Filed in the New York federal court, the suit claims thousands of consumers were misled about how Kalshi's markets functioned and who they were actually betting against.
Key Takeaways
- The class action lawsuit alleges Kalshi operated unlicensed sports betting while presenting itself as a federally regulated exchange.
- Plaintiffs claim consumers unknowingly wagered against Kalshi or its partners through market-making activity.
- The lawsuit follows a Nevada ruling that allows state regulators to pursue enforcement against Kalshi's sports event markets.
Seven named plaintiffs seek recovery of the money they wagered, along with the possibility of triple the damages. The complaint argues that Kalshi's sports event markets, including wagers on NFL game outcomes and player performance totals, operate in practice like standard sports betting.
“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,” the lawsuit reads.
Kalshi, or companies connected to it, are also accused of acting as market makers whenever bets went against their own odds projections. This meant that customers unknowingly bet against Kalshi or hedge-fund partners, rather than other users.
The suit claims that sports markets accounted for roughly 90% of the platform's activity in September, contradicting the company's broader positioning as a general events exchange. It also alleged that violations of business, consumer protection, and gambling laws occurred across more than 30 states and Washington, D.C., including New York, California, and Florida.
It further claimed that the platform was marketed in ways that suggested its sports markets were legally compliant despite lacking state authorization.
Kalshi founder Luana Lopes Lara referred to the lawsuit as “baseless” in a social media post Friday morning.
I try to avoid engaging with stupid lies on X, but this is a pure smear campaign.
— Luana Lopes Lara (@luanalopeslara) November 28, 2025
This account, and others, are being paid by our competitor to amplify a baseless lawsuit. The allegations are false and reveal a fundamental (and maybe intentional) misunderstanding of how these… pic.twitter.com/lptGJmUVJX
Enjoying Covers content? Add us as a preferred source on your Google account
Nevada ruling heightens scrutiny of Kalshi's model
The class action filing comes shortly after Kalshi encountered additional pressure in Nevada, where a federal judge lifted an earlier injunction that had blocked state regulators from acting against the company. While the case is still active, the Nevada Gaming Commission and the Nevada Gaming Control Board can continue enforcing the law.
This decision undermines Kalshi's claim that the Commodity Futures Trading Commission is the sole organization to which it is accountable.
The judge stated that some Kalshi markets were more akin to sports prop bets than derivatives due to the presence of new information, such as contracts linked to football touchdowns. He concluded that these types of contracts are not swaps under federal law, so states can make rules to regulate them.
The decision prompted a swift reaction from the stock market, with major sports betting companies such as DraftKings and Flutter Entertainment both experiencing gains during the day.
Kalshi filed an emergency motion to halt the decision while it appeals, stating that the company could face criminal charges if the order remains in place. The Nevada case continues alongside other state inquiries into sports event contracts offered without gaming authorization.
