Published on: November 28, 2025, 12:40h.
Updated on: November 28, 2025, 12:40h.
- Plaintiffs in a nationwide class action challenge Kalshi’s claims regarding superior odds compared to traditional sportsbooks.
- The lawsuit states that Kalshi customers are effectively betting against the house, undermining the idea of a true peer-to-peer betting platform.
- Legal allegations assert Kalshi is in violation of laws across multiple states, including California, Florida, and New York.
A proposed class action has been initiated against Kalshi in the U.S. District Court for the Southern District of New York, alleging that the prediction markets provider utilizes misleading tactics in its sports event contracts, contravening gaming regulations in numerous jurisdictions.
Legal representatives for seven named plaintiffs argue that Kalshi, while promoting itself as a prediction market, essentially operates an unregulated sports gambling platform—misleading users into believing they are betting against one another and securing better odds compared to conventional sportsbooks. The lawsuit claims that the actual experience for customers is markedly different from Kalshi’s marketing narrative.
The complaint states, “Defendants Kalshi Trading LLC and KalshiEX, both wholly owned entities of Kalshi, engage as advanced ‘market makers’ that bet against consumers whenever their wagers deviate from Kalshi’s internal projected odds.”
Additionally, the plaintiffs highlight that Kalshi collaborates with hedge funds such as Susquehanna International Group to take opposing positions on customer bets.
“Market makers function similarly to ‘House’ betting in illicit sports wagering, which is explicitly prohibited by law,” notes the lawsuit. “While consumers may place bets in any sportsbook, the House establishes the betting line and benefits when users make incorrect picks. Kalshi’s market makers determine the baseline. It is believed Kalshi communicates directly with its market makers to set these betting lines.”
Kalshi’s Treatment of Retail Traders
It is well-documented that Kalshi, currently facing increasing legal scrutiny at the state level and losing some cases, imposes fees on smaller retail bettors while exempting sharper bettors and market makers from these charges in return for the liquidity they offer.
This exemplifies the challenges faced by smaller bettors on Kalshi, and evidence indicates that most participants on the platform do not achieve profitability. Some analysts suggest that consistently winning on platforms like Kalshi necessitates the identification of mispriced markets. Contracts for sports events, especially for high-profile sports like football and basketball, are less likely to be frequently mispriced due to their high liquidity.
Attorneys for the proposed class maintain that Kalshi clients are misled into believing they are wagering against their peers when, in fact, they are betting against Kalshi, supported by market makers equipped with advanced technology.
“Consumers are unaware that they are being misled into betting against Kalshi,” the lawyers assert.
“When consumers place bets on Kalshi, they are in competition with funds backed by a sophisticated market maker on the other side.”
Allegation of State Law Violations by Kalshi
The class action further claims that Kalshi has breached numerous state regulations, including California’s unfair competition statute, various gaming regulations in Florida, and New York’s general business law. These claims could have significant implications as New York represents the largest sports betting market in the U.S., and in Florida, this activity is controlled by the Seminole Tribe, making it largely unregulated in California.
“By engaging in unlicensed sports betting, Kalshi has violated gambling regulations, conducted illegal deceptive practices, and unjustly profited at the expense of countless consumers,” declares the lawsuit. “Consequently, the plaintiffs, on behalf of themselves and a class of similarly situated individuals, are pursuing this lawsuit to recover their wagers, as well as associated costs and attorney fees.”
The lawsuit was submitted shortly after reports indicated that Kalshi’s valuation has soared to $11 billion, and just a day after Robinhood Markets, a major contributor to Kalshi’s volume, announced plans to develop its own prediction market platform.