Facing lawsuits in seven states while simultaneously raising $11 billion in funding: The Game of Thrones for prediction market star Kalshi | Bee Network

Facing lawsuits in seven states while simultaneously raising $11 billion in funding: The Game of Thrones for prediction market star Kalshi | Bee Network Login 熱門新聞 Meme Launchpad AI 代理商 DeSci 熱門鏈瀏覽器 新人必讀 衝百倍幣 蜜蜂遊戲 必備網站 必備APP 必關大神 DePIN 新人必備 教我避坑 基本工具 深度網站 交易所 NFT 工具 你好， 登出 Web3宇宙 遊戲 DApp 蜂巢 增長平台 生態 搜尋 英語 Coins儲值 登入 下載 Web3大學 遊戲 DApp 蜂巢 生態 家•分析•正文 Facing lawsuits in seven states while simultaneously raising $11 billion in funding: The Game of Thrones for prediction market star Kalshi分析3 个月前更新懷亞特 20,064 41 Author | Ethan ( @ethanzhang_web3 )

最近 class-action lawsuit filed in the Southern District of New York has dragged the prediction platform Kalshi into yet another regulatory dispute.

Seven users accused the platform of selling sports-related contracts without obtaining any state betting licenses and questioned its market-making structure, claiming it “essentially puts users at odds with the bookmakers.” Just days earlier, a Nevada court had lifted a protective injunction against Kalshi, leaving him facing potential criminal charges in the state.

Regulatory scrutiny has become increasingly stringent. The Nevada Gaming Authority determined that Kalshi’s sports “event contracts” were essentially unlicensed betting products and should not enjoy the regulatory protection of the CFTC (Commodity Futures Trading Commission). Federal Judge Andrew Gordon stated bluntly at the hearing, “Before Kalshi, no one would have considered sports betting to be a financial product.”

However, what most people did not expect was that in the weeks when regulatory crackdowns and legal pressure tightened simultaneously, Kalshi’s various business metrics showed an almost 德菲ant growth against the trend—trading volume repeatedly hit new highs, and its latest round of financing valued it at $11 billion , making it the undisputed superstar in the prediction market sector.

The fervor of capital and the coldness of regulation create a striking contrast in this era: why does a company deemed “illegal” by multiple parties exhibit unprecedented vitality in the market? This article attempts to penetrate the court documents and transaction data to dissect the regulatory logic conflicts, trust crises, and contrarian bets faced by Kalshi, and to restore the true logic of this multi-billion dollar market at the center of the storm.

The Disruption of Legal Identity: How Did Kalshi Go from “Compliant” to “Illegal”? If we go back to the beginning of the story, one issue that is most often overlooked is that Kalshi was not “illegal” in the past; it was just that it was suddenly no longer allowed to continue operating legally. This shift from “compliant” to “illegal” did not stem from a change in the business itself, but rather from a shift in regulatory perception—especially regarding the core issue of whether prediction markets belong to “financial derivatives” or “unlicensed gambling.”

Kalshi’s self-narrative has always been clear: it is a CFTC-registered “Designated Contract 市場” (DCM) offering event contracts that are binary options derivatives with “real economic purposes,” and therefore should be exclusively subject to federal regulation. And in the past few years, this argument has indeed gained traction within the US regulatory system, allowing Kalshi to launch binary prediction contracts in hundreds of areas, including election cycles, macroeconomics, and technology events, gradually growing into an industry leader.

However, Nevada regulators clearly did not accept this logic, especially when Kalshi began venturing into the sports betting sector, causing the conflict to escalate instantly. Sports betting is one of the most strictly regulated and locally-defined sectors in the United States, with each state having completely different systems for licensing, taxation, and risk control. In other words, sports betting is a typical “state-specific red line.” When Kalshi began launching contracts involving sports events such as touchdown times and game progress, Nevada regulators argued that these products were essentially prop bets, a typical category of sports betting, rather than financial derivatives.

This is also why Judge Gordon’s attitude shifted significantly during the hearing. He pointed out that, according to Kalshi’s definition, almost anything involving future events and related to money could be packaged as a derivative, which would render the regulatory system ineffective. The court subsequently clarified in its ruling that sporting events do not fall under the “excluded commodity” framework of the Commodity 交換 Act and are therefore not subject to exclusive regulation by the CFTC.

As a result, the Nevada court not only officially lifted Kalshi’s protective injunction at the end of November, but also made it clear that these sports-related event contracts are essentially betting contracts, not derivatives.

This ruling not only exposes Kalshi’s operations in Nevada to both criminal and civil enforcement risks, but also provides an important legal reference for other states across the country. Currently, at least six states have initiated litigation in different courts regarding the ‘regulatory boundaries of prediction markets,’ and the rulings show increasingly clear jurisdictional disagreements.

Federalists: Some states still insist on the principle of federal priority and advocate for unified regulation by the CFTC ; Gaming Proponents: More states are following Nevada’s lead and mandating its inclusion in their local gaming licensing systems ; Legislators: Some states are attempting to redefine the legal boundaries of “prediction markets” by amending the law. In an environment of regulatory fragmentation, Kalshi’s legality suddenly lost its unified interpretation, becoming a casualty of the “battle for regulatory interpretation.” More realistically, if Kalshi continues to operate in Nevada after the injunction is lifted, it will face potential criminal prosecution at any time, which is why the company urgently applied to the court for a stay of execution.

From derivatives to gambling, from federal to state regulation, and the fierce competition among courts, users, and industry stakeholders, several unavoidable questions have surfaced: What exactly is a prediction market? Is its legal status stable? Can it find its place within the existing US regulatory system?

Before this identity crisis could be resolved, Kalshi faced an even more difficult second blow—questioning from its own users.

Why are even users suing? Market-making controversy, allegations of performance-based agreements, and the shadow of “market manipulators.”
If regulatory conflicts merely exposed loopholes in the system, then class-action lawsuits from users directly undermine the foundation of trust in trading platforms.

On November 28, a class-action lawsuit was filed by seven Kalshi users, representing the nationally renowned plaintiffs’ law firm Lieff Cabraser Heimann & Bernstein. While the core allegations are only two, they are all potentially damaging, attempting to fundamentally reshape public perception of Kalshi:

First, the charge of illegal operation: The prosecution argues that Kalshi falsely advertised and provided what is essentially “sports betting” services without holding any state-level betting license.

Second, acting as both referee and player: The prosecution alleges that Kalshi’s affiliated market makers were not simply liquidity providers, but actually acted as the platform’s “house,” allowing users to gamble against professional trading platforms with informational or financial advantages without their knowledge.

In other words, users are not questioning the prediction contracts themselves, but rather the transparency and fairness of the trading mechanism. A highly inflammatory statement in the lawsuit quickly went viral within the industry: “When consumers place bets on Kalshi, they are not facing the market, but the house.”

This statement is so damaging because it precisely breaches the “identity defense” of prediction markets. Platforms like Kalshi have consistently argued that they are neutral matchmakers, market participants that discover prices, rather than betting companies that gamble against users. However, once the accusation that “the platform participates in pricing and profits from it” is established, this boundary collapses instantly on both legal and ethical grounds.

In response to the accusations, Kalshi co-founder Luana Lopes Lara swiftly countered , claiming the lawsuit was “based on a fundamental misunderstanding of the mechanisms of the derivatives market.” Her defense logic aligns with common sense in standard financial markets:

Like other financial exchanges, Kalshi allows multiple market makers to compete to provide liquidity; Related market makers will not receive any internal preferential treatment; It is “industry practice” for affiliated institutions to provide liquidity in the early stages.

In traditional finance or mature 加密貨幣 asset markets (such as Binance or Coinbase), the coexistence of “market makers” and “proprietary trading” may be an industry norm. However, in the gray and emerging field of prediction markets, the user structure and perception are completely different. When ordinary retail investors encounter opponents with high win rates, bottomless order books, or rapidly adjusting order books, they find it difficult to understand as “efficient market pricing” and are more inclined to believe that it is “market manipulation by large investors.”

The most dangerous aspect of this lawsuit lies in its fatal narrative resonance with Nevada’s regulatory actions. Regulators accuse you of unlicensed gambling, while users claim you’re operating as a house. Combined, Kalshi faces not just compliance risks, but also a more difficult-to-reverse narrative risk.

In the financial world, market making is inherently a neutral infrastructure; however, in the context of prediction markets, it is being rapidly stigmatized as “manipulation” and “profiteering.” When the consensus becomes that “Kalshi is not the open market it claims to be,” its legitimacy and business ethics will simultaneously fail.

Ironically, the dual crises of law and trust did not halt Kalshi’s growth trajectory . After the lawsuit was exposed, trading volume in its sports and politics sections actually increased. This anomaly reveals the deepest contradiction in the current prediction market: faced with extreme speculative demand, users seem indifferent to whether it’s an “exchange” or a “casino”; as long as the order book is moving, funds will flow in.

Why is Kalshi becoming increasingly sought after by the market despite being mired in compliance issues? Despite facing attacks from regulators in multiple states, the reversal of judicial rulings, and class-action lawsuits from users, Kalshi delivered a stunning performance amidst the crisis: platform transaction volume surged exponentially, driven by sports and political contracts, while simultaneously completing a $1 billion funding round led by Sequoia Capital , pushing its latest valuation to a high of $11 billion. This coexistence of a “regulatory winter” and a “market boom” may seem counterintuitive, but it profoundly reveals the structural characteristics of the emerging prediction market sector. Kalshi’s counter-cyclical surge is not accidental, but rather the result of the resonance of four market logics.

I. Psychological Game: The “Countdown to Regulation” Triggers a Race-Earning Effect The uncertainty surrounding regulation didn’t deter users; instead, it fueled a kind of “doomsday frenzy” of participation . With Nevada lifting its ban, the public realized the lines between prediction markets and traditional gambling were blurring. This anticipation of “imminent regulatory tightening” translated into scarcity anxiety among users: traders rushed to enter before the trading window closed. For speculative funds, the more ambiguous the rules, the greater the potential arbitrage opportunities. Kalshi effectively benefited from a “regulatory risk premium” that generated significant traffic.

II. Capital Voting: The Final Struggle of Betting on “Institutional Dividends” From the perspective of top institutions like Sequoia Capital, the current legal disputes are merely growing pains in the early stages of industry development, not the end result. The logic of capital is very clear: prediction markets are not only a substitute for gambling, but also part of the future financial infrastructure. According to a Certuity report, the market size will exceed $95.5 billion by 2035, with a compound annual growth rate of nearly 47%. In the eyes of institutional investors, the obstacles Kalshi is currently facing precisely prove that it is a leading player. Capital is making a contrarian bet: prediction markets will eventually be incorporated into a regulatory system, and the surviving leading platforms will exclusively enjoy huge institutional dividends. The current high valuation is pricing in the window of opportunity where “regulation is not yet finalized, but demand is irreversible.”

III. Competitive Landscape: Liquidity Siphon Caused by Supply-Side Clearing Kalshi’s surge in trading volume is largely attributed to the forced exit of competitors. With 加密網 and Robinhood suspending their operations during appeals, a significant vacuum emerged on the supply side of the compliant prediction market in the US. With demand (especially during elections and sporting seasons) continuing to expand, market liquidity was forced to seek new outlets. As the only remaining open platform in this field, Kalshi absorbed the massive traffic overflowing from competing platforms. This “survival of the fittest” effect made it, in the short term, the deepest and broadest liquidity pool in the US market, further reinforcing its Matthew effect.

IV. The Essence of Demand: A Paradigm Shift from “Speculation” to “Risk Expression” Finally, and most fundamentally, the core driving force behind user participation in prediction markets is no longer merely speculation. In an era of heightened macroeconomic volatility, the demand for risk pricing of events such as interest rate decisions, election trends, and geopolitical events has surged. Traditional financial derivatives struggle to cover these non-standardized events, while prediction markets fill this gap. For professional traders, it serves as a risk hedging tool; for ordinary users, it provides a high-frequency channel for participating in public events. This trading demand, based on the “event itself,” is highly inelastic and will not disappear due to regulatory bans in a single state. On the contrary, the high exposure brought about by regulatory controversies has propelled prediction markets from a niche financial circle to the center of public discourse.

In conclusion, Kalshi’s counter-trend growth is not due to the adage “the more illegal, the more attractive,” but rather a product of the combined effects of a rigid surge in demand, long-term bets from capital, and a supply vacuum in the competitive landscape .

Kalshi is currently at a highly volatile historical juncture: it faces an unprecedented dark period on the legal front, yet it is experiencing its most brilliant growth on the commercial front. This may be the inevitable “coming-of-age ceremony” for all disruptive financial innovations— before the regulatory system achieves logical consistency, the market has already cast its vote of approval with real money.

Conclusion: The ability to predict the future of the market is being prematurely exposed in Kalshi’s case.
The storm Kalshi is currently in is far more than a simple compliance crisis for a startup; it’s a systemic conflict that has been prematurely ignited. In an extremely concentrated and intense manner, it’s forcing the US financial system to confront a long-debated core question: how should prediction markets, this new type of financial infrastructure, be defined, regulated, and even permitted to exist?

It exists on the fringes of securities and gambling—possessing both the price discovery function of financial markets and the entertainment attributes of mass consumption; it carries both the serious need to hedge real-world risks and is rife with the frenzied games of speculators. It is precisely this “hybridity of identity” that has led to a four-dimensional tug-of-war between CFTC regulators, state law enforcement, the judicial system, and market users on this issue, with conflicting goals and mutually exclusive methods.

In this sense, Kalshi’s experience was not an isolated “accident,” but rather an inevitable “origin” for the entire industry.

From Nevada to Massachusetts, the regulatory boundaries of prediction markets are being rewritten state by state; from the CFTC’s policy shifts to repeated rulings in local courts, the federal system is revealing its hesitation in the face of new species; and from user-initiated class-action lawsuits to heated debates in the public sphere, the public is beginning to scrutinize the industry’s true nature with a critical eye—is it a transparent “oracle” or a “digital casino” disguised as finance?

This intense uncertainty, seemingly dangerous, is actually proof of the industry’s explosive potential. Looking back over the past two decades, from electronic payments to crypto assets, from internet securities to DeFi, every institutional conflict at the edge of finance has ultimately driven a restructuring of the underlying logic and given rise to new regulatory paradigms. The market is currently entering the same cycle, only its evolution is far exceeding expectations.

Standing at the crossroads of the future, we can identify at least three irreversible trends:

First, the battle for legitimacy will become a protracted one. Given that at least six states have offered drastically different interpretations of the law, the jurisdictional dispute is highly likely to escalate to the Supreme Court level. A single ruling will not suffice, and fragmented regulation will be the norm.

Second, prediction markets are moving from a “niche toy” to “infrastructure.” Whether it’s using money as a vote to hedge political risks or quantifying society’s expectations of macroeconomic events, prediction markets are becoming an indispensable “risk pricing anchor” in the real world.

Third, the industry’s final outcome will be dynamically reshaped by multiple forces. Ultimately, the market’s shape will not be determined by the unilateral will of a single regulator, but by a dynamic balance jointly constructed by market demand, capital forces, political maneuvering, and judicial precedents.

Therefore, Kalshi’s victory or defeat may no longer be the sole focus; rather, it’s more like the first curtain to be torn open. In the short term, two key legal documents on December 8th and 12th will determine whether Kalshi can survive this regulatory storm; but looking at the bigger picture, these two days of clashes are destined to become the first watershed moment in the multi-billion dollar prediction market.

Predicting the future of the market cannot be written by a single judgment, but its direction will inevitably change at a crucial juncture. And this juncture, through Kalshi’s actions, has arrived ahead of schedule.

本文源自網路： Facing lawsuits in seven states while simultaneously raising $11 billion in funding: The Game of Thrones for prediction market star Kalshi

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