Kalshi Faces Lawsuits in Four States Over Illegal Gambling Claims
Kalshi, Susquehanna, and Robinhood were hit with lawsuits in Ohio, Illinois, Massachusetts, and South Carolina, accused of running an illegal gambling operation disguised as prediction markets.
A Legal Storm Brews Across States
Kalshi, a New York-based prediction market platform, is under fire in four states: Ohio, Illinois, Massachusetts, and South Carolina, following lawsuits filed.
The suits, first spotlighted by gaming law attorney Daniel Wallach, also target Susquehanna International Group and Robinhood, accusing them of operating an “illegal gambling enterprise” under the guise of financial event contracts.
Plaintiffs seek to recover gambling losses for state residents, arguing Kalshi’s sports-related markets, like March Madness bets, violate state laws.
The Heart of the Allegations
The lawsuits claim Kalshi’s prediction markets, which let users wager on outcomes like sports games or political events, are unlicensed sports betting in disguise. Regulated by the Commodity Futures Trading Commission (CFTC) since 2020, Kalshi insists its contracts are legal derivatives, not gambling.
Ohio’s suit, filed in Franklin County, cites the state’s Sports Wagering Act, arguing Kalshi’s offerings lack consumer protections, like age limits, required for sportsbooks.
Illinois’ case, unconfirmed by InGame but reported by Wallach, mirrors Ohio’s. Massachusetts and South Carolina plaintiffs point to state gambling bans, seeking triple damages under laws like Kentucky’s Statute of Anne, per Wallach.
Susquehanna’s Role as Market Maker
Susquehanna, a $25 billion trading firm, is a key target as a “market maker” alongside Kalshi’s subsidiary, Kalshi Trading LLC. Market makers ensure liquidity by buying and selling event contracts, enabling platforms like Kalshi to function.
The suits allege these firms “facilitate illegal gambling” by powering unregulated markets, pocketing “financial and non-financial kickbacks” from Kalshi, per court filings.
Susquehanna, which became Kalshi’s first institutional market maker in April 2024, allegedly uses the same model as banned sportsbooks, profiting over $50 per session from state residents.
Robinhood’s Tangled Partnership
Robinhood, a $40 billion brokerage, entered the fray via a March partnership with Kalshi, offering sports and political contracts to its 20 million users.
Massachusetts’ suit, bolstered by a March 20 subpoena from Secretary Bill Galvin, claims Robinhood’s Kalshi-powered markets violate state gambling laws.
Unlike Kalshi, which sued states like Nevada to keep markets open, Robinhood has complied with cease-and-desist orders, exiting New Jersey after a March 27 notice. The suits argue Robinhood’s scale amplifies harm, with plaintiffs seeking losses from its 1 million Ohio users alone.
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