Kalshi, a U.S.-based prediction market operator, is facing a nationwide federal class action lawsuit in the Southern District of New York. Plaintiffs allege the platform misled users by presenting its markets as peer-to-peer, while in reality institutional market makers acted as the House, betting against consumers. The complaint identifies Kalshi Trading LLC and KalshiEX as in-house entities that engage in market-making activities, allegedly profiting when users lose.
According to the lawsuit, Kalshi partners with hedge funds, including Susquehanna International Group, to provide high-frequency market making. Plaintiffs argue that these arrangements create unfair trading conditions, giving institutional players an advantage through advanced research, proprietary modelling, preferential fees, and deeper platform access. Consumers are allegedly unaware of this structural imbalance, believing they are simply trading against peers.
The case comes amid increased scrutiny of prediction markets from regulators and financial institutions. Bank of America recently warned that event-based betting platforms could exacerbate consumer debt risks due to gamified interfaces and rapid wagering.
This legal challenge follows a recent Nevada court decision that reversed a preliminary injunction favoring Kalshi, which previously allowed the company to claim federal commodities law protection against state regulators. Judge Andrew Gordon ruled that Kalshi’s interpretation disrupted state control over gambling and contradicted congressional intent.
The outcome of the New York lawsuit could have far-reaching implications for the regulation of prediction markets and the broader U.S. sports betting landscape. It raises critical questions about transparency, fairness, and whether event-based trading platforms should fall under state gambling rules or federal oversight. Kalshi has not publicly responded to the allegations, but the case is expected to be closely watched by the iGaming industry, regulators, and investors alike.
