Date of publication: October 18, 2025, 12:48h.

Last revised on: October 18, 2025, 12:49h.

• Kalshi faces a lawsuit in New York’s Southern District
• The class-action suit claims Kalshi is participating in illegal sports betting

The prediction market platform Kalshi has been implicated in a federal lawsuit filed in New York’s Southern District, facing accusations of engaging in unlawful gambling activities.

The plaintiff, Daniel Yee from San Francisco, claims he was misled by the New York-based firm. His lawsuit argues that Kalshi advertised its services as legal sports gambling contests, but after registering and depositing funds, he discovered that the sports event contracts offered were, in fact, illegal gambling activities.

“Due to Kalshi’s misleading representations, Plaintiff Daniel Yee and the affected parties sought entry into legal gambling contests. What they received were entries into illegal gambling activities,” the lawsuit states.

“The Plaintiff and the impacted parties have not realized the promised benefits, as these illegal entries had significantly less (in fact, no) worth compared to entry into legal activities. If Kalshi had truthfully disclosed the illegal nature of their services, the Plaintiff and others would not have engaged in using Kalshi’s gambling services at all,” the lawsuit elaborates.

Accusations in the Complaint

Yee alleges that Kalshi has misrepresented the legality of sports betting in all 50 states. Although sports betting is sanctioned in 39 states and Washington, D.C., California—where Yee resides—is not among them.

Yee’s legal representatives argue that Kalshi’s assertion, contingent on its regulation by the federal Commodity Futures Trading Commission (CFTC) due to its derivative-based investment offerings, is misleading.

“Kalshi’s operations breach laws in over two dozen states that forbid gambling or restrict the recovery of gambling losses. As a company based in New York with a choice of law clause in its service terms linking to New York law, Kalshi is accountable to New York’s licensing and regulatory standards. They have failed to meet these obligations, therefore rendering their operations illegal across the country,” the lawsuit claims.

Yee’s complaint further notes that California has prohibited commercial gambling for more than 150 years. The case contends that Kalshi’s sports event contracts fall under the category of a “banking game,” where Kalshi, acting as the house, participates and takes a commission from the bets.

Kalshi is accused of breaching state laws that ban sports betting, engaging in unfair competition, violating California’s Consumer Legal Remedies Act, and reaping unjust enrichment.

Request for a Jury Trial

Yee is seeking a jury trial in New York to reclaim over $2,000 lost on Kalshi. The proposed class also demands nominal, punitive, consequential, and additional damages, along with equitable relief and coverage of all legal fees arising from the case.

The core of these lawsuits rests on whether federal regulations governing futures markets take precedence over state regulations surrounding sports-related prediction markets.