Kalshi Faces Lawsuit Alleging Illegal Sports Betting Operations
WASHINGTON D.C. – Kalshi, a federally regulated derivatives exchange, is responding to a newly filed lawsuit alleging its event contracts constitute illegal sports betting. The complaint, details of wich were not immediately available, prompted a public statement from Kalshi founder Luana Lopes Lara, who characterized the allegations as a misunderstanding of how event markets function and accused competitors of amplifying the claims.
The lawsuit arrives as Kalshi expands its offerings in political and increasingly,sports-related event markets,attracting scrutiny over its regulatory status. While Kalshi operates under oversight from the Commodity Futures Trading commission (CFTC) as a derivatives exchange,the plaintiffs argue its contracts violate state and federal laws prohibiting sports betting. A resolution to the case could significantly impact Kalshi’s business model and possibly set a precedent for other event market platforms.
Lara defended the platform, stating it is indeed “structured as a federally regulated derivatives exchange, overseen by the Commodity Futures Trading Commission.” She further asserted on X (formerly Twitter) that the lawsuit is a “pure smear campaign” fueled by a competitor paying to amplify “baseless” allegations.
“I try to avoid engaging with stupid lies on X, but this is a pure smear campaign,” Lara wrote in a post on November 28, 2025. “This account, and others, are being paid by our competitor to amplify a baseless lawsuit. The allegations are false and reveal a fundamental (and maybe intentional) misunderstanding of how these…”
The legal challenge echoes previous issues faced by polymarket, another prediction market platform. Polymarket was able to resume U.S. operations after acquiring a derivatives exchange and clearinghouse to ensure full regulatory compliance.
**Related: Kalshi raises $1 billion, taking its valuation to $11 billion
