Key Moments:
- Plaintiffs filed a class action accusing Kalshi of running an illegal, unlicensed sportsbook.
- Some plaintiffs admit they have gambling problems and say Kalshi targets vulnerable bettors.
- The complaint claims Kalshi markets sports wagers in states where betting is illegal.
Allegations of Unlicensed Sports Wagering
A group of Kalshi users filed a class action lawsuit in the US District Court for the Southern District of New York. They claim Kalshi operates as a “shadow” sportsbook and targets people with gambling problems. The plaintiffs include Alexander Hallman, Jeremy Kravetz, Daniel Greenberg, Nathaniel Bee, and Abhijn Gutta. They say Kalshi disguises itself as a prediction market but actually offers illegal sports betting.
The plaintiffs argue that Kalshi labels its sports products as designated contract markets (DCMs). However, they say the platform functions like an unlicensed sportsbook. The complaint states: “In substance and operation, Kalshi is—and continues to be—an illegal, unlicensed (or ‘shadow’) sportsbook masquerading as a ‘prediction market.’” It adds that Kalshi exploits federal commodities rules to offer sports wagers in states where betting is banned, avoiding licensing, taxes, and consumer protections.
Plaintiffs Describe Their Experiences
Alexander Hallman, who lives in Colorado, says he lost thousands of dollars on sports derivatives through Kalshi. He also claims he tried to block Kalshi ads on social media, but the ads kept appearing.
Jeremy Kravetz of Tennessee openly admits he struggles with gambling. The complaint alleges he placed $25 million in sports wagers through Kalshi and Robinhood, which offers Kalshi contracts via a partnership. Kravetz says he used Kalshi because he believed it was safer than traditional sports betting. Yet he says he could not self-exclude despite repeated attempts.
Nathaniel Bee says Kalshi marketed itself as a legal sports betting alternative in California, where betting is banned. The complaint quotes him saying he saw ads and believed Kalshi’s claims. He adds that he would not have used the platform if he knew it was illegal.
Legal Team Challenges Kalshi’s Positioning
The complaint points to Kalshi’s 2024 dispute with the Commodities Futures Trading Commission (CFTC). Back then, Kalshi argued that sports derivatives were banned. Yet, the lawsuit claims the company soon began offering sports wagering products ahead of the 2025 football season.
Additionally, the plaintiffs say Kalshi co-founder Tarek Mansour confirmed the company’s strategy during an October 2024 Reddit AMA. They argue Kalshi won the CFTC case by distinguishing election contracts from sports betting. However, they say Kalshi quickly shifted to sports wagers afterward. The complaint claims Kalshi then misled users by saying it had “legalized sports betting” and allowed it “in all 50 states.”
Marketing Practices Under Scrutiny
The lawsuit also highlights Kalshi’s advertising in states where sports betting is illegal. It cites campaigns in Georgia, Minnesota, and Texas. The plaintiffs claim Kalshi used these ads to mislead users about the legality of its services.
| Plaintiff | State | Alleged Activity |
|---|---|---|
| Alexander Hallman | Colorado | Lost thousands, tried to block ads |
| Jeremy Kravetz | Tennessee | Placed $25M in wagers, failed self-exclusion |
| Nathaniel Bee | California | Believed ads, lost money |
- Author
Daniel Williams
