Thread by @WALLACHLEGAL

NEW: Kalshi has been hit with a nationwide class action lawsuit in the SDNY for operating an illegal online sports betting platform and for "duping" customers into believing that they are legally gambling against other consumers when they are actually gambling against the house.

"Consumers on Kalshi do not only bet against each other—they also bet against the House. Kalshi operates institutional market makers, which also gamble against the consumer."

"A Kalshi representative called Kalshi Trading 'one of many ‘peers’ in the peer-to-peer ecosystem. Kalshi Trading is not a peer; it is the House."

"Kalshi also partners with hedge funds, such as Susquehanna International Group, to provide a sophisticated 'market making' service for Kalshi by being on the other side of consumers’ bets."

"Market makers operate using a model indistinguishable from House betting in other illegal sportsbooks that the law prohibits. While consumers may bet on either side of the House baseline in any sportsbook, the House sets the betting line, and profits when consumers pick wrong."

"Market makers benefit from their unique contractual and technological integration with prediction markets, which provide them with financial benefits, reduced (or zero) fees, differing position limits & enhanced access. These advantages greatly reduce their financial exposure."

"As a result, individual consumers hardly stand a chance, all the while thinking they are just betting against other consumers."

"Because Kalshi serves as a counterparty, shouldering the credit risk of all bets, and serving as its own market maker (facing off against consumers in the process), Kalshi and its partners are gambling 'winners' at the expense of the consumer."

"When consumers place bets on Kalshi, they face off against money provided by a sophisticated market maker on the other side of the ledger. Market makers make it possible for consumers to place illegal, unregulated wagers 'against the House.'"

"Kalshi enables addictive gambling behavior by underage adults, problem gamblers, and others by enticing them to gamble with 'free' money while ensuring them that they are legally gambling against peers. For example, Kalshi runs advertisements through sponsored influencers."

"Kalshi has sponsored a variety of influencers, including a 15-year-old gaming influencer."

"On September 19, 2025, Kalshi also announced that it was targeting college campuses. Kalshi publicly announced that it was partnering with college clubs as part of 'KalshiU' to bring in 'the next 100M users.'"

"Kalshi makes unlawful gambling widely available to the public through its online and mobile platforms, presenting broader swaths of the population with the attendant risks of gambling without any of the safeguards."

"The risk is particularly damaging because the average age of the population participating in these unlawful games skews younger."

"Kalshi tries to disguise its illegal gambling operation by using non-gambling terms like 'sports trading' or 'build your combo' so consumers do not think they are gambling. In reality, “sports trading” is just plain sports betting."

"And Kalshi’s 'build your combo' feature is just a classic parlay, where consumers combine multiple bets against the House, and are only paid out if they win all of them."

"Kalshi has now become primarily a sports-betting site. In September 2025, 90% of Kalshi’s volume was from sports betting, with consumers placing approximately $2 billion in sports bets."

"Kalshi at times drops the mask and admits that it is a betting site, falsely marketing its platform as 'legal sports betting.' But Kalshi’s betting platform is in no way legal. Consumers are tricked into betting against the House."

"For example, Kalshi ran an advertisement on Instagram featuring a photo of former quarterback Tom Brady (who is not affiliated with Kalshi), stating, “POV: You just found out that you can legally bet on the NFL in all 50 states using Kalshi'."

"It similarly ran ads pretending to be news articles. One such ad stated, 'Breaking News: Sports Betting in California is Now Legal: New York-headquartered prediction market Kalshi has legalized sports betting in all 50 states.'"

"But Kalshi does not offer legal sports betting—it offers illegal sports betting. New York State bans all forms of gambling under the state constitution, except for specifically named exceptions."

The complaint seeks to create a nationwide class consisting of "All persons in the United States who spent money by wagering on Kalshi’s mobile or web platforms."

In addition to a nationwide class, Plaintiffs seek to create State sub-classes consisting of consumers from the following 30 states:

The complaint also highlights Kalshi's numerous alleged violations of California law, including Penal Code section 337a's ban against pool selling and bookmaking -- which featured prominently in @AGRobBonta's recent opinion on daily fantasy sports.

@AGRobBonta There is also a separate stand-alone count for Kalshi's numerous alleged violations of Florida law. "Upon information and belief, thousands of individuals within Florida have lost— and continue to lose—money by playing at games of chance (i.e., gambling) with Kalshi."

@AGRobBonta The relief sought by plaintiffs includes treble damages, restitution, disgorgement, injunctive relief, and attorneys' fees and expenses.