Kalshi Hit With Class-Action Complaint Alleging ‘Unlawful Sports Gambling’

• Kalshi has been sued in New York’s Southern District
• The proposed class-action lawsuit alleges that Kalshi is engaged in illegal sports gambling

Prediction market Kalshi has been sued in New York’s Southern District federal courthouse on allegations that the online platform is engaged in illegal gambling.

Plaintiff Daniel Yee, a San Francisco resident, alleges on behalf of the proposed class that he was wronged by the New York-based company. Yee’s complaint contends that Kalshi promised to operate legal sports gambling contests, but after registering an account and depositing money, he became aware that the platform’s sports event contracts were “illegal sports gambling contests.”

Based on Kalshi’s false representations, Plaintiff Daniel Yee 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 complaint read.

“Plaintiff and the Classes did not receive the benefit of the bargain, as the illegal entries had substantially less (in fact, zero) value than entry into legal contests. Moreover, 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,” the litigation continued.

Complaint Allegations

Yee contends that Kalshi misled consumers by claiming that sports betting is “now legal in all 50 states.” While sports betting is legal in 39 states and Washington, DC, Yee’s California is not one of them.

Yee’s attorneys argue that Kalshi’s bold claim, based on the fact that it’s regulated by the federal Commodity Futures Trading Commission (CFTC) because it facilitates derivative-based financial investment instruments, is erroneous.

Kalshi’s operations violate the specific laws of over two dozen 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,” the complaint declares.

Yee’s complaint says California has banned commercial gambling for over 150 years. The litigation argues that Kalshi’s sports event contracts qualify as a “banking game” where the “house” is a participant in facilitating the contest and taking a piece of the action as a commission.

Kalshi is charged with violating state laws prohibiting sports betting, unfair competition laws, California’s Consumer Legal Remedies Act, and unjust enrichment

Jury Trial Sought

Yee is seeking a jury trial in New York and the return of the more than $2,000 he’s lost on Kalshi. The proposed class additionally seeks nominal, punitive, consequential, and other damages, equitable relief, and all legal costs and expenses associated with the case.

The crux of the lawsuits largely depends on whether federal law, which oversees futures markets, preempts states from regulating sports-related prediction markets.

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