Kentucky Sues Kalshi Over Alleged Gambling

Kalshi, a prediction market operator, has come under fire in a new lawsuit in Kentucky, which claims that its platform enables illegal gambling across the state.

Kentucky Plaintiff Seeks Damages from Kalshi Over Alleged Bets

The case was filed on May 11 in the US District Court for the Western District of Kentucky by resident Donovan Roberts. Roberts is seeking damages on behalf of a broader group of individuals for alleged financial losses connected to the platform’s actions.

Kalshi’s online marketplace allows users to trade contracts tied to the results of real-world events, including elections, sports matches, and weather developments, the complaint says. The company may call these instruments financial products, but the suit states that, in practice, they are wagers with real money. 

The filing also argues these offerings are not within Kentucky’s legal framework. The state allows sports betting, but only if it is licensed and regulated, and the plaintiff says Kalshi has not gotten the necessary approval to offer such services domestically.

Accordingly, the action seeks to recover money lost by Kentuckians under a statute that provides for the recovery of money lost through illegal gambling. The law provides a legal basis for the aggrieved parties to seek recovery and serves as a deterrent to illegal wagering.

Class Action Cites Social Harm Concerns

Several Susquehanna-affiliated entities and several entities connected to Kalshi are named as defendants in the lawsuit. It argues that the platform has established ongoing relationships with users in Kentucky via its website and payment systems, thus creating sufficient grounds for jurisdiction in the state.

The complaint also points to the readily available nature of these platforms, stating that users can engage constantly from virtually any location via devices that have internet access. It says this on-demand availability is similar to that of traditional gambling venues, but without the physical barriers.

The filing also raises concerns about social impacts more generally. It relates to studies that show financial problems, relationship strains, and mental health issues can be caused by digital betting-like platforms. Younger audiences are a particular target, and studies have shown that exposure to similar applications may increase the likelihood of gambling behavior in the future. 

Roberts is trying to represent a statewide class of people who have lost more than a minimal amount over a period of time. The claim says that combining these cases in a single proceeding is a more reasonable way to resolve what could otherwise involve thousands of separate claims.In other news, Kalshi is also the target of a similar class action in Massachusetts.