Callum Hamilton is a highly experienced gambler and poker player with over 15 years of experience in journalism, covering everything from sports to casinos and video games.
Read Full BioKalshi is facing a class action lawsuit in the U.S. District Court for the Southern District of New York, accusing the prediction market platform of offering illegal gambling services nationwide.
The lawsuit seeks to recover the losses from all players who have wagered money on the platform across the entire United States.
Plaintiff Daniel Yee, a resident of San Francisco, alleges that Kalshi misled him after the company falsely claimed to offer legal sports betting contracts. After registering on the platform, Yee says he was only provided illegal betting opportunities. The lawsuit relates to a claim from Kalshi that sports betting was “now legal in all fifty states.”
The suit argues that “if Kalshi had accurately disclosed the unlawful nature of the gambling services, Plaintiff and the Classes would not have purchased Kalshi’s sports gambling services at all.”
Kalshi Lawsuit Seeks Losses Returned to US Players
Although he filed the suit in New York, Kalshi’s base, Yee is seeking the return of $2,000 of losses incurred on the platform while residing in California, where sports betting is illegal. The case, however, could have broader ramifications, potentially setting a precedent for how prediction markets are classified across multiple states.
The suit stated: “Despite Kalshi’s bold claim, which it makes across the country, Kalshi’s operations violate the specific laws of over two dozen additional states that prohibit gambling or expressly allow for the recovery of gambling losses.”
“As a New York headquartered company that includes a New York choice of law clause in its terms of service, Kalshi is subject to the licensing and registration requirements of New York—yet, it has failed to comply with those regulations, rendering the rest of its nationwide operations illegal too.”
Kalshi Faces Numerous Legal Problems
The lawsuit adds to Kalshi’s mounting legal challenges as multiple states are issuing cease-and-desist orders and filing other complaints.
On September 12, 2025, Massachusetts Attorney General Andrea Joy Campbell filed a lawsuit accusing Kalshi of operating as an unlicensed gambling site. She ordered it to cease activities in the state.
Meanwhile, in Nevada, Kalshi has been involved in a lengthy process of back-and-forth legal wrangling. The next case expected to be heard is in December.
After receiving an initial cease-and-desist order, Kalshi won a preliminary injunction against the state. That prevented the Nevada Gaming Control Board from enforcing measures, a decision that it immediately appealed. Kalshi later lost a related lawsuit against the state after a Nevada federal magistrate dismissed its motions.
In a recent meeting of the control board, member George Assad stated, “A sports wager is a sports wager. Every bet made in this town is a contract. You can call it a derivative contract. You can call it a credit default swap, like they did during the housing bubble. Whatever you want to call it, it’s still a sports bet. Therefore, it’s under the jurisdiction of the Nevada Gaming Commission and Nevada Gaming Control Board.”
Investors Remain Confident Despite Legal Headwinds
Despite mounting legal challenges, investors remain unfazed by the regulatory risk. A recent $300 million Series D round of funding valued the company at $5 billion. That valuation more than doubled its previous one after a funding round six months prior.
That valuation was also based on Kalshi’s rapid international expansion, with the platform now available in over 140 countries worldwide. However, the company’s global growth may only intensify scrutiny as regulators at home and abroad question where the line between prediction markets and gambling truly lies.
