Published on: January 19, 2026, 05:00h.
Updated on: January 18, 2026, 10:37h.
- Several plaintiffs have acknowledged issues with gambling.
- They assert that the prediction market operator seeks to profit from gambling addicts.
- The plaintiffs label Kalshi as a “shadow” sportsbook, violating state gaming regulations.
A collective of Kalshi users, some of whom openly admit to having gambling challenges, initiated a class action lawsuit against the prediction market behemoth, alleging that the firm intentionally exploits vulnerable bettors.
In a lawsuit filed recently in the US District Court for the Southern District of New York, plaintiffs Alexander Hallman, Jeremy Kravetz, Daniel Greenberg, Nathaniel Bee, and Abhijn Gutta claim that Kalshi operates as an “unlicensed and illegal sportsbook” under the guise of a prediction market. Their complaint also argues that Kalshi misclassifies its sports event contracts, asserting they are not sports wagers but designated contract markets (DCMs).
This claim is untrue. In essence and practice, Kalshi is—and continues to be—an illegal, unlicensed (‘shadow’) sportsbook disguised as a ‘prediction market.’” It continues, “By invoking federal commodities regulation as a pretense, Kalshi unlawfully provides sports wagers in jurisdictions where sports betting is restricted and bypasses state licensing, taxation, and consumer protection standards in states where sports betting is allowed.”
As observed in other lawsuits involving prediction market operators, legal representatives for the class action highlight Kalshi’s inconsistent stance regarding its classification as a sportsbook, noting that there was a time when the firm had accepted that sports event contracts were not permissible under the Commodities Futures Trading Commission (CFTC).
Plaintiffs Claim They Were Misled by Kalshi
Colorado resident Hallman alleges that he lost thousands of dollars wagering on sports derivatives through Kalshi. Following these losses, he attempted to block Kalshi advertisements across various social media platforms, yet he continued to encounter the ads.
Tennessee resident Kravetz, who admits to being a problematic bettor, reportedly placed $25 million in sports wagers through both Kalshi and Robinhood, the latter of which has partnered with Kalshi to offer a wide array of sports event contracts. Legal representatives for the class note that Kravetz was drawn to Kalshi, believing it to be a safer option compared to traditional sports betting, but later found himself unable to exclude himself from the platform.
Another plaintiff, Bee, utilized Kalshi because the company marketed itself as a legitimate alternative to sports betting in California, a state where such betting is not legalized.
“Plaintiff saw Kalshi ads on social media. Trusting the Defendant’s claims that sports betting is lawful in California, Plaintiff engaged in wagering that resulted in losses. Had Plaintiff been aware that Kalshi was functioning as an illegal sports betting operation, he would have refrained from using Kalshi for placing sports bets,” the complaint states.
Lawyers Assert Kalshi Knew Its Sports Contracts Were Illegal
Legal counsel for the plaintiffs emphasize that during Kalshi’s legal battle with the CFTC in 2024 to obtain approval for event contracts related to the 2024 presidential election, the company explicitly indicated that sports derivatives were forbidden by the CFTC. Shortly after, the firm began offering these contracts, setting the stage for a significant push into sports betting alongside the 2025 football season.
The attorneys recall that during an October 2024 “ask me anything” session on Reddit, co-founder Tarek Mansour stated that Kalshi had won its CFTC case by effectively differentiating between election event contracts and sports betting. Nonetheless, the company entered the sports wagering market soon after, as per the class action lawyers.
“In doing so, Kalshi made false and misleading statements to its users, creating the impression that it had ‘legalized sports betting’ and that users could engage in it ‘in all 50 states,’” the complaint argues.
The legal filing further asserts that Kalshi has engaged in extensive sports-related advertising, targeting states such as Georgia, Minnesota, and Texas where sports wagering is prohibited.