Lynnae is a journalist covering the intersection of technology, culture, and gambling. She has more than five years of experience as a writer and editor, with bylines at SlashGear and MakeUseOf. On the iGaming side,...
Read Full BioA group of Illinois residents has filed a class action lawsuit against Kalshi and several of its subsidiaries, alleging the company operates an illegal, unlicensed gambling platform in the state while marketing itself as a prediction market. News of the lawsuit was first reported by sports betting and gaming lawyer Daniel Wallach on X.
The lawsuit was filed on January 8 in the U.S. District Court for the Northern District of Illinois and names Brett Josephson, Luis Cuevas, Tyrone Stuckey, and Temuujin Shaariibuu as plaintiffs and lists the following defendants: Kalshi, Inc., KalshiEX, LLC, Kalshi Klear, LLC, Kalshi Klear, Inc., and Kalshi Trading LLC.
One of the complaint’s core allegations is that Kalshi is offering wagers on real-world outcomes, including sports and other event categories, even though the company doesn’t have the licenses required under Illinois law to do so.
“Kalshi is an illegal betting platform that Defendants label as a ‘prediction market,’ but which in reality offers illegal, unregulated wagers on the occurrence (or non-occurrence) of future events, such as sporting events, election results, pop culture events, and even the weather. This is unregulated gambling and is prohibited under Illinois law,” the plaintiffs allege in the complaint.
The plaintiffs are seeking to represent “All Illinois residents who, during the applicable limitations period, have lost money wagering on Kalshi’s mobile or web platforms.” The complaint includes a demand for a jury trial and seeks class certification, damages, attorneys’ fees, and injunctive and equitable relief, including restitution and disgorgement.
What the Plaintiffs are Alleging
The complaint relies on Illinois gambling and consumer protection laws, arguing that without state licensing and authorization from the Illinois Gaming Board, Kalshi’s sports-related contracts constitute illegal sports wagering, while its non-sports markets amount to unlawful gambling.
“Defendants falsely represent to consumers and the public that Kalshi is legal and legitimate in every state, including in Illinois. But in reality, Kalshi is an unlicensed betting platform,” the lawsuit states.
One theme runs throughout the complaint: while Kalshi claims it’s a peer-to-peer platform, in reality, traders are placing bets against Kalshi itself. Plaintiffs allege Kalshi is effectively acting as the counterparty through liquidity arrangements and “market makers,” including an affiliated entity (Kalshi Trading LLC), which they argue makes the platform operate “against the house” in a way that’s no different from traditional sportsbooks.
The plaintiffs argue that Kalshi misrepresents how its markets function. According to the complaint, “Kalshi markets these event contracts as peer-to-peer transactions in which users are trading against one another based on differing predictions of future events. In reality, because Kalshi’s market maker consistently supplies liquidity on both sides of each event contract, consumers are not meaningfully betting against other participants but against the house itself.”
The four causes of action in the Illinois filing are:
- Illinois Gambling Loss Recovery Statute (Loss Recovery Act)
- Illinois Consumer Fraud and Deceptive Business Practices Act
- Illinois Uniform Deceptive Trade Practices Act
- Unjust enrichment
Lawsuit Adds to Earlier Class-Action Claims Against Kalshi
Kalshi has seen its fair share of class-action lawsuits over the past year related to its sports-event contracts and marketing. In late November 2025, a nationwide class-action lawsuit was filed in the U.S. District Court for the Southern District of New York, alleging that Kalshi was operating an unlicensed sports betting platform under the guise of prediction markets, misleading consumers about the legality of its offerings.
Kalshi co-founder Luana Lopes Lara rejected the allegations, accusing the company’s competitors of engaging in a “smear campaign” by amplifying the “baseless allegations” and saying that, “The allegations are false and reveal a fundamental (and maybe intentional) misunderstanding of how these markets work,” adding that, “We will address it in court.”
Another class action lawsuit was filed in October 2025 in the U.S. District Court for the Southern District of New York by California resident Daniel Yee. Instead of focusing on Kalshi’s regulatory classification, this lawsuit takes issue with its nationwide marketing, alleging that the company falsely told users that “sports betting is now legal in all fifty states,” all while operating without state gaming licenses.
“Based on Kalshi’s false representations, Plaintiff Daniel Yee (“Plaintiff”) and the Classes bargained for entry into legal sports gambling contests. But all they received from Kalshi was entry into illegal sports gambling contests,” the lawsuit alleges.
These recent class-action lawsuits are just the tip of the iceberg, as Kalshi, a federally regulated prediction market, faces challenges on multiple fronts from regulators, tribal groups, and other legal opponents over whether some of its contracts are unlicensed gambling.
