Recently, the US prediction market platform Kalshi faced a class action lawsuit, which pushed the debate over whether "event contracts" are considered gambling directly to federal court. The plaintiffs come from six states, and their core accusation is interesting: they claim that market makers on the Kalshi platform enjoy privileges that ordinary users do not have, such as lower fees and different holding limits, making it almost like betting against "the house" rather than the fair competition with other consumers as originally thought. Kalshi responded quickly, calling the lawsuit "a baseless fictional story", emphasizing that it is a federally regulated designated contract market with transparent operations.
Lawsuit core: Are market makers "unfair opponents"?
The core of this class action lawsuit points to the relationship between Kalshi and its market makers. Plaintiffs believe that market makers like Susquehanna International Group, by deeply integrating with the platform, have gained an unfair advantage, "greatly reducing" their financial risks, while ordinary consumers are kept in the dark. For example, you want to buy a contract for "Detroit Lions defeating Dallas Cowboys" at 61 cents, but you do not know whether the counterparty to your contract is another retail investor or an institutional market maker like SIG. Kalshi co-founder Luana Lopes Lara firmly denied these accusations on social media, emphasizing that Kalshi is a peer-to-peer exchange with "no house", and stated that the trading volume of its proprietary market maker, Kalshi Trading, accounted for less than 6% last month, a common practice in financial exchanges.
Kalshi's counterattack and the industry background
Facing bans from multiple state regulatory agencies and this class action lawsuit, Kalshi is fighting on multiple fronts. In addition to planning to appeal against unfavorable court rulings, its founders also described the lawsuit as a means for vested interests to "spread false narratives to discredit the prediction market", comparing it to the banking industry's crackdown on cryptocurrencies in the past. Behind this legal battle is the ambiguous identity positioning of the prediction market. A well-known sports betting analyst pointed out in a letter to the US Commodity Futures Trading Commission that there is no difference in function between betting companies in sports betting and market makers in financial markets. Simply put, this industry inherently carries the dual genes of gambling and finance.
The market in turmoil and the intense future competition
This lawsuit comes at a crucial time, as the entire prediction market track is about to become even more crowded. Sports betting giants DraftKings and FanDuel plan to launch their own prediction market platforms in the coming months, followed by Fanatics, Coinbase, and even former President Trump's Truth Social platform. Kalshi feels the pressure especially since its key partner SIG just announced last week that it will form a joint venture with Robinhood to launch their own prediction market exchange. With lawsuits from multiple states internally and giants looming externally, the outcome of Kalshi's legal battle could affect more than just its own fate.
For more in-depth analysis on global gambling regulation and market dynamics, refer to the professional reports on the PASA official website.
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