Class Action Suit Against Kalshi Market Makers

Class action suit vs. Kalshi lifts temperature in heated legal battle Plaintiffs claim market makers place customers at a disadvantage, charges that Kalshi contend are meritless. In a period rife with litigation involving prediction markets, a group of plaintiffs filed a federal lawsuit against Kalshi last week alleging that the company misled customers on its market-making practices. On the eve of Thanksgiving, plaintiffs from six states filed the civil lawsuit against Kalshi in New York claiming that the prediction market platform violated state gambling laws, engaged in illegal deceptive activity and unjustly enriched itself at the expense of its customers. Attorneys for the plaintiffs filed the suit one day after a Nevada federal judge lifted a preliminary injunction that previously enabled Kalshi to continue operations in the state. Kalshi indicated that it plans to appeal that judge’s decision. Kalshi, which handled more than $1 billion in NFL event contracts in the first month of the 2025 season, described the class-action lawsuit as “meritless fiction”. In a statement released on 26 November, Kalshi wrote: “This lawsuit demonstrates many fundamental misunderstandings about how federally regulated DCMs (designated contract markets) operate.” The lawsuit appears to be the first of a class-action variety against a prediction market, an asset class that has grown rapidly over the last six months. The suit may trigger further debate on the role of market makers throughout the exchange trading ecosystem. Market makers are typically defined as firms that help facilitate the buying and selling of securities by providing liquidity. Plaintiffs: Market makers benefit at expense of consumers In April 2024, Susquehanna International Group (SIG) announced a partnership with Kalshi, under which it became the first institutional market maker to launch a trading desk dedicated specifically to event contracts. Founded by billionaire Jeff Yass, SIG is a global quantitative trading firm that serves as a market maker for a wide range of trading products, particularly options and exchange-traded funds (ETFs). While Kalshi partners with other market makers beyond SIG, the prediction market has not disclosed the names of the other companies. SIG is widely viewed as Kalshi’s primary market maker. According to the lawsuit, market makers benefit from their “unique contractual and technological integration” with prediction markets. The relationship, the plaintiffs contend, provides the market makers with unfair advantages such as reduced fees, differing position limits and enhanced access to the markets. Moreover, the advantages “greatly reduce” the market makers’ financial exposure, the plaintiffs allege. “As a result, individual consumers hardly stand a chance, all the while thinking they are just betting against other consumers,” the lawsuit states. A market maker essentially serves as a counterparty to ensure

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