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Read Full BioA group of self-described gambling addicts filed a lawsuit against Kalshi in New York, alleging the company falsely claims not to be a betting platform.
A group of five individuals claims they lost substantial amounts of money on the prediction market site, which deceived them into thinking it was a legal form of betting.
The lawsuit seeks to hold Kalshi accountable for “billions in wagers” allegedly generated through its “unlawful operation of an illegal, unlicensed sports betting platform and related deceptive and misleading business practices.”
The plaintiffs appear to be a group of unrelated users, with the only connection being their loss of funds on Kalshi. The names of the five men are Alexander Hallman, Jeremy Kravetz, Daniel Greenberg, Nathaniel Bee, and Abhijn Gutta.
The action was brought by Kaplan Fox & Kilsheimer, a company specializing in class action lawsuits against corporations. When contacted for comment, the company did not immediately respond.
Who are the Users Suing Kalshi?
Hallman is from Colorado, and the lawsuit says he lost thousands of dollars gambling on Kalshi. A self-confessed problem gambler, Hallman attempted to block Kalshi ads from appearing on his social media feeds, citing concerns that “viewing these ads would result in him giving in to an uncontrollable urge to place sports bets on Kalshi.”
Kravetz, a Tennessee resident, also “has a self-professed gambling problem and has self-excluded from all licensed legal sportsbooks in Tennessee,” says the lawsuit.
Tennessee became the latest state to send Kalshi a cease-and-desist order this week, claiming the company is operating an unlicensed sports betting operation.
Kravetz says Kalshi and Robinhood, which hosts Kalshi’s markets, does not follow the state’s gambling protections around self-exclusions. He was therefore unable to exclude himself from using the platforms, and like Hallman, could not resist the temptation to place wagers on sports. The lawsuit states he also lost thousands of dollars on the platform.
Other Users Claim They Were Duped
The other three plaintiffs are all from states that do not currently have legal sports betting: Texas, California, and Georgia. Bee says he was deceived into thinking sports betting was now legal in California by a Kalshi ad.
The lawsuit says, had he “known that Kalshi was operating an illegal sports betting operation, he would have never used Kalshi to place sports bets.”
Gutta of Georgia also reported losing thousands of dollars wagering on sports, with the misguided belief that because Kalshi was a peer-to-peer exchange, “it would provide better chances at winning compared to a traditional sportsbook.”
Finally, Greenberg of Texas says he was similarly misled into believing Texas had legalized online sports betting due to Kalshi’s ads. He is similarly seeking to recover thousands of dollars lost gambling on the website.
The lawsuit references Kalshi ads that stated, “sports betting is now legal” in all 50 states, including California, Texas, and Georgia.
Kalshi’s Words Used Against Them
It is the latest in a line of legal actions against Kalshi, with several states and users suing the company. A similar lawsuit was filed last week in Illinois, also claiming the company is operating an illegal betting platform. Kalshi is now facing at least 20 separate cases in courts across the country.
The new lawsuit in New York cites Kalshi’s previous assertions that sports event contracts violate the Commodity Exchange Act (CEA), which sets the rulebook for prediction market platforms.
Congress is reportedly preparing to amend the CEA to include explicit text that would prohibit sports-related contracts. The lawsuit argues that the current text already forbids the markets. Currently, the CEA says that “gaming” markets are prohibited.
The lawsuit alleges that when arguing its case for election markets against the Commodity Futures Trading Commission (CFTC), Kalshi said “sports betting contracts is ‘precisely what Congress had in mind‘ when it prohibited registered entities from offering ‘gaming’ contracts.”
It also highlights posts from Kalshi CEO Tarek Mansour on Reddit in October 2024, in which he stated that sports markets were illegal under federal law. Mansour wrote, “There are certain prediction scenarios that we will never list . . . we also avoid anything that could be interpreted as ‘gaming’ (like sports), as that is illegal under federal law.”
Lawsuit Alleges Kalshi Operates Against-the-House Sportsbook
The lawsuit also alleges that Kalshi operates like a sportsbook, using its own trading team to offer liquidity on markets. It notes, “if a bettor wants to place a ‘No’ bet and there are not enough bettors on the opposite ‘Yes’ side, Kalshi (or one of its affiliates) steps in and buys the ‘Yes’ shares.”
Another lawsuit filed last year similarly alleged that Kalshi has a dedicated trading team that functions like a sportsbook. Kalshi denied those claims, with co-founder Luana Lopes Lara saying it is a smear campaign backed by an unnamed competitor.
Lopes Lara stated that Kalshi Trading is just one of many participants, receiving “no preferential access or treatment,” operating with a separate team, and accounting for less than 6% of the sports-market-making volume this month.
Despite facing a growing number of legal challenges, Kalshi continues to expand its operations. The platform now takes in billions of dollars in trading volume from its sports markets.
