Kalshi is facing a class action lawsuit for illegal gambling and misleading customers.

According to ChainCatcher news and Bloomberg reports, the prediction market platform Kalshi Inc. has recently faced a class action lawsuit, accused of illegally operating a sports betting business without obtaining any state gambling licenses and misleading customers about its market-making activities. The lawsuit was filed by seven users of the Kalshi app, claiming that the company falsely asserted that it provided legal sports betting services. The lawsuit also accuses Kalshi's affiliate, Kalshi Trading, of acting as a market maker by setting unfavorable odds for customers, effectively making consumers bet against the house. Kalshi, however, insists that it operates as a derivatives market, regulated federally only by the Commodity Futures Trading Commission (CFTC). This is the latest in a series of legal challenges facing Kalshi. Previously, a federal judge in Nevada ruled that the company should be subject to state regulation, determining that event contracts based on the results of sporting events do not fall under the exclusive jurisdiction of the CFTC. Currently, at least five courts across the United States are handling disputes between prediction markets and state gambling regulations.