Kalshi Betting Class Action Claims Prediction Market Exploits Users’ Gambling Addictions

Prediction markets continue to raise concerns among public health experts and consumer advocates, who warn the platforms may normalize speculative betting and fuel gambling addiction risks among young adults.

A Kentucky man has filed a class action lawsuit, alleging that the online prediction market, Kalshi, is operating as an illegal gambling platform that allows users to wager real money on sports, elections and virtually any other major event.

The complaint (PDF) was brought by Donovan Roberts in the U.S. District Court for the Western District of Kentucky on May 11. It names Kalshi Inc., Kalshiex LLC, Kalshi Klear Inc., Kalshi Klear LLC, Kalshi Trading LLC, Susquehanna International Group LLP and Susquehanna Government Products LLLP as defendants.

Roberts is seeking to recover his own alleged losses from using Kalshi and to represent other Kentucky residents who made similar trades on the platform during the past five years. The proposed class action invokes a Kentucky gambling loss recovery statute, which allows individuals to sue to recoup money lost through alleged illegal wagering operations.

Kalshi operates what it calls a “prediction market,” where users buy and sell “event contracts” tied to the outcome of future events. In this capacity, the platform allows “bets” on sports contests, elections, weather events, interest rates and other topics, framing the transactions as financial contracts rather than traditional wagers.

Roberts’s lawsuit argues that Kalshi’s “prediction market” label is merely a distinction without a difference. He claims the platform is gambling by another name, offering untaxed and unregulated betting to Kentucky residents without a state sports wagering license or compliance with Kentucky gambling laws.

Online Gambling Addiction Concerns

Roberts’s case shows how online gambling has expanded well beyond traditional sportsbooks since the U.S. Supreme Court’s 2018 decision paved the way for states to legalize mobile sports betting.

Sports betting platforms such as DraftKings and FanDuel have already introduced millions of younger adults to the ability to place bets from their smartphones at any time of day. In recent months, that rapid expansion has helped fuel a wave of sports betting addiction lawsuits alleging the companies promoted addictive gambling behavior and failed to protect vulnerable users. 

Kalshi and other prediction market platforms are now expanding that model, allowing users to wager not only on athletic contests but on elections, economic indicators and countless other real-world events.

Through Kalshi, users can place real-money bets on who will win the Super Bowl, how many touchdowns a player will score, whether a candidate will win an election and a broad range of other outcomes. Screenshots included in Roberts’s complaint show betting options that mirror traditional sportsbooks, including point spreads, total points and player proposition bets.

Although Roberts does not specifically allege that young people are being targeted, public health experts and researchers have raised concerns that app-based gambling platforms are particularly attractive to younger users who are accustomed to mobile gaming, social media and digital trading platforms. The complaint itself cites studies suggesting that gambling-style apps have a particular appeal to teenagers and may serve as an early introduction to regular gambling behavior.

Kalshi Gambling Allegations

Roberts’s lawsuit argues that Kalshi is part of a broader trend in which companies use smartphones to make gambling available “24-hours-a-day, 365-days-a-year” from homes, workplaces and virtually anywhere users have an internet connection.

According to the complaint, researchers and public health experts have linked gambling addiction to financial stress, relationship breakdown, family violence, mental illness and suicide. Roberts alleges Kalshi profits from these harms by presenting itself as a legitimate financial exchange while functioning as a bookmaker.

Roberts’s filing points out that Kentucky permits sports betting only through a tightly regulated system overseen by the Kentucky Horse Racing and Gaming Corporation. Operators must obtain licenses, pay fees and comply with extensive regulations designed to protect consumers and generate tax revenue for the state.

The lawsuit alleges Kalshi has ignored those requirements while continuing to solicit Kentucky residents, accept deposits from Kentucky bank accounts and process wagers from users throughout the state.

Under Kentucky law, anyone who loses more than $5 in illegal gambling during a 24-hour period may sue to recover those losses within five years. Roberts seeks to represent all Kentucky residents who lost more than $5 on Kalshi’s website or app during any 24-hour period over the last five years.

“Kalshi believes that it is above Kentucky law, operating what it calls a ‘prediction market’ that allows Kentucky residents to buy and sell ‘event contracts’ related to everything from elections to sporting outcomes. It does this without any attempt to follow Kentucky’s regulations or obtain a license to operate within the law. Kalshi takes millions out of Kentucky’s economy with this activity each year, all without registering to do business in Kentucky or paying any taxes to the state.”

— Donovan Roberts v. Kalshi Inc. et al.

Roberts alleges there are thousands of Kentucky residents who may qualify for the proposed class, and that Kalshi’s own records can identify users and calculate the amount of their losses.

The complaint is seeking certification of a statewide class action and a court order requiring Kalshi to refund all net gambling losses suffered by Kentucky users over the last five years, along with interest, attorneys’ fees and other relief.

Gambling Addiction Lawsuits

In addition to concerns about predication markets contributing to burgeoning gambling addictions among America’s youth, a series of DraftKings lawsuits and FanDuel lawsuits have been filed in recent months.

Many of these claims indicate that individuals were targeted by these platforms once the companies’ algorithms identified them as likely to become addicted. These users were then flooded with personalized promotions, loyalty rewards and in some cases, appointed a personal handler, all of which normalized betting practices and downplayed the financial peril.

In light of these concerns, gambling addiction lawyers continue to review potential claims from individuals who suffered significant losses through sports betting and other online wagering platforms.

Individuals who believe they may qualify for a sports betting addiction lawsuit can submit information for a free legal review. All claims are handled on a contingency fee basis, meaning there are no upfront costs and attorneys are paid only if a settlement or verdict is obtained.

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