Kalshi is facing a class action lawsuit in the US District Court for the Western District of Kentucky over allegations that the company operated illegal gambling services. The complaint, filed by plaintiff Donovan Roberts on behalf of himself and other Kentucky residents, seeks to recover the money people lost gambling on Kalshi’s website over the past five years.
Kentucky class action seeks recovery of gambling losses
According to the complaint, the statewide class action seeks to recover losses allegedly suffered by Kentucky residents who participated in illegal gambling activities on Kalshi.com. The complaint argues that Kalshi’s market is “nothing more than gambling” and alleges that the company operates an untaxed and unregulated betting platform in Kentucky.
The lawsuit was brought under Section 372.020 of the Kentucky Revised Statutes, commonly referred to as Kentucky’s gambling loss recovery statute. This statute allows any person who loses money in an illegal gambling game to recover the lost amount from the winner, or from the person who operated the game, within six months of the payment.
Plaintiffs argue that Kalshi’s platform allows users to gamble by buying “futures contracts” linked to the outcomes of elections, sports events, weather conditions, and other real-world occurrences. The lawsuit names Kalshi, Inc., KalshiEX LLC, Kalshi Klear, Inc., Kalshi Klear LLC, Kalshi Trading LLC, Susquehanna International Group, LLP, and Susquehanna Government Products, LLLP.
Complaint: Kalshi prediction markets are illegal gambling
According to the filing, Kalshi lets users place real-money bets “24-hours-a-day, 365-days-a-year, without having to leave their homes or workplaces.” The plaintiff claims that Kalshi’s event contracts act as sports betting products and gambling wagers instead of real financial instruments. The filing argues that these activities are illegal gambling under Kentucky law because users risk real money on uncertain future outcomes. Gaming attorney and sports betting expert Daniel Wallach told SiGMA News, “The sports event contracts are classic gambling.”
While Kentucky allows sports betting in certain regulated environments, the complaint claims that Kalshi did not meet the state’s licensing and regulatory requirements. The lawsuit says that unregulated sports betting is still illegal under Kentucky law and accuses Kalshi of operating outside the state’s gambling rules. According to the complaint, Kentucky closely regulates gambling activities to protect residents from the financial and social issues related to excessive betting and gambling addiction.
Class action lawsuit raises addiction concerns
The filing also references concerns raised by gambling addiction experts and researchers regarding the rise of online betting platforms and prediction market services. According to the complaint, gambling addiction can contribute to financial stress, family conflict, relationship breakdowns, mental health struggles, and other social harms.
The lawsuit additionally cites scientific studies and anecdotal reports suggesting that online gambling platforms and apps may appeal to gambling addicts in ways similar to traditional casino-style gaming. The complaint also alleges that such platforms may have particular appeal among younger users and teenagers.
Plaintiff seeks relief for Kentucky residents
Plaintiffs are seeking to recover alleged gambling losses on behalf of individuals throughout Kentucky, including residents of Jefferson County. As of now, Kalshi has not publicly responded to the allegations contained in the lawsuit.
In another development, Kentucky Governor Andy Beshear’s veto of House Bill 904 was overridden by the Kentucky legislature after just one day, meaning that the sweeping gambling reform , which includes a restriction on prediction market operations in the state, is now set to be codified. One of the most important aspects of HB 904 is that the minimum legal age for someone to engage in sports betting will be raised from 18 to 21.
The bill also introduces restrictions on prediction market operations in Kentucky. It is set to prohibit sports betting operators, including those offering fantasy sports, from participating in or contracting with platforms which offer event contracts through prediction markets.
Kentucky’s official entry into the sports betting market began on 7 September 2023. Online wagering platforms went live on 28 September. In its first year, Kentucky saw a total betting volume of $2.3 billion placed through online platforms. The first year of online betting in Kentucky generated $264.3 million in adjusted gross revenue (AGR).
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