Prediction market company Kalshi is now battling a string of class action lawsuits that accuse it of operating what amounts to unlicensed sports betting. The cases, filed in several states, argue that the company’s online trading platform crosses the line into illegal gambling.
In Oregon, a new federal class action lawsuit filed on Friday (February 20) by plaintiff Ian Reynolds claims Kalshi and related entities are running “an illegal online gambling enterprise” under state law.
The complaint argues that the platform’s event contracts, which allow users to trade on outcomes including sports games, function the same way as banned wagers. According to the filing, consumers who lose money on those contracts are being harmed. Reynolds is seeking damages and restitution for a proposed class, along with a declaratory judgment and a jury trial.
Growing challenges across multiple states amid Oregon class action lawsuit against Kalshi
The Oregon case joins similar litigation already moving through courts elsewhere. In New York federal court late last year, another proposed class action accused Kalshi of presenting itself as a lawful “prediction market” while in reality offering unlicensed sports betting. The lawsuit, brought on behalf of thousands of users, contends the company misrepresented how its markets worked and profited from customer losses. “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 complaint states.
A separate class action filed in January in Alabama alleges Kalshi’s operations violate the state’s tough anti-gambling statutes. Because Alabama largely prohibits traditional sports wagering, the plaintiffs argue that Kalshi’s event contracts should be treated as bets subject to state regulation.
Each lawsuit argues the contracts traded on Kalshi’s platform look and behave like wagers on sporting events. The company, however, maintains that its products are financial derivatives overseen by the Commodity Futures Trading Commission (CFTC). Kalshi is registered with the CFTC as a designated contract market and has consistently argued that federal law, not state gambling rules, governs its exchange.
Some of the complaints also focus on Kalshi’s affiliated market-making entities, which provide liquidity by taking positions in trades. Plaintiffs claim those affiliates effectively stand on the other side of users’ bets, making the platform resemble a sportsbook. Company leaders have rejected that characterization, describing the allegations as “misunderstandings” of how designated contract markets function and defending affiliated market makers as a standard feature of regulated exchanges.
The lawsuits unfold against a wider regulatory backlash. Gaming authorities in states including Massachusetts and Nevada have moved to restrict Kalshi’s sports event contracts, asserting they constitute illegal gambling without proper state licenses. While some federal judges have sided with regulators, Kalshi continues to fight those rulings on jurisdictional grounds.
Featured image: Kalshi / Canva
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