Kalshi Faces Legal Action Over Alleged Illegal Sports Betting

The Massachusetts Attorney General’s Office has initiated legal proceedings against the prediction market operator Kalshi. Attorney General Andrea Campbell lodged the lawsuit on Friday in Suffolk County Superior Court. The complaint accuses Kalshi of functioning as an unauthorized sports betting venue. Allegations center around Kalshi taking in over $1 billion in sports wagers throughout the first half of 2025 without obtaining the necessary licenses. The suit highlights that more than 75% of Kalshi’s trading volume is associated with sports events. It states, “The figures suggest that Kalshi makes a larger percentage of its money from sports than DraftKings or FanDuel – businesses that are synonymous with sports betting in the US.” The lawsuit outlines how Kalshi’s platform reflects "a digital gambling experience" and utilizes behavioral design techniques derived from gambling psychology. Moreover, it highlights Kalshi’s introduction of a parlay product and its positioning as a sports betting service.

National Scrutiny on Kalshi’s Operations

Kalshi's entry into the sports events contract sector earlier this year has sparked increased scrutiny and legal challenges. Various states, including Arizona, Illinois, Maryland, Montana, Nevada, New Jersey, and Ohio, sent cease-and-desist notifications to Kalshi during the spring, demanding a halt to their operations. Additionally, the Michigan Gaming Control Board started investigations into prediction markets in April. The Tennessee Sports Wagering Council also urged the federal Commodity Futures Trading Commission (CFTC), the body overseeing trading contracts, to terminate sports prediction markets. Although the CFTC endorsed these prediction markets, one departing commissioner recently cautioned about the potential weak oversight during their farewell speech. As major sports betting platforms like FanDuel dip into prediction markets, the Ohio Casino Control Commission indicated that the integration of event markets could lead to possible revocation of licenses for operators.

Ongoing Legal Battles and Regulatory Challenges

Kalshi is embroiled in numerous lawsuits with regulatory authorities in Maryland, Nevada, and New Jersey. Despite these legal hurdles, Kalshi continues its operations in these states under the protection of preliminary injunctions. However, Nevada and New Jersey have appealed the decisions, and in Maryland, a judge ruled in favor of the state with Kalshi appealing. Attorney General Campbell was among the 34 state attorneys general supporting New Jersey in the appeals court case. In a separate legal challenge, three tribes from California filed a suit against Kalshi in July, claiming violations of the Indian Gaming Regulatory Act. Additionally, the Ho-Chunk Nation of Wisconsin brought a lawsuit against Kalshi last month. Notably, Kalshi secured a legal victory against the CFTC in October 2024, permitting them to provide election event contracts ahead of the November elections. This ongoing saga underscores the complexities and challenges faced by prediction markets in the evolving landscape of sports and event wagering.