A man who lost an astonishing $308,000 by making hundreds of separate sports bets on the prediction market Kalshi, is suing the company to recover his losses. In fact, he’s asking for $580,000 — even more than he frittered away.
While a guy suing a gambling service after losing sounds like a punch line, there’s a lot at stake. The lawsuit strikes at the heart of a heated debate over whether prediction platforms like Kalshi and Polymarket amount to gambling — or, as the companies maintain, if they’re so-called “event contracts” that conform with federal regulations.
Washington, where the suit was filed in September on behalf of Bellevue resident Scott Bright, has “prohibited Internet gambling since 2006,” per the filing. As Ars Technica reports, Kalshi brought forth a motion to dismiss the lawsuit on October 30, denying that betting on the outcomes of sports games on the platform amounted to “gambling.”
“The contracts which Plaintiff mischaracterizes as gambling are event contracts offered on the Platform subject to the CEA [Commodity Exchange Act], in conformance with the rules and regulations of the CFTC [Commodity Futures Trading Commission], the federal agency which has statutory authority to oversee the CEA,” the motion reads.
To the attorneys general of states including Washington, Utah, and New York, however, Kalshi is an “online casino” that needs to be shut down. In late July, New York attorney general Letitia James accused the company of “running an illegal gambling operation.” Just last week, her counterpart in Arkansas, the state’s attorney general Tim Griffin, similarly took aim at Kalshi.
“It doesn’t take a genius to understand that wagering money on whether the Razorbacks win or lose is gambling,” he wrote in a statement. “And gambling on an unregulated platform is squarely prohibited by Arkansas law.”
However, federal courts have yet to agree on whether prediction markets should be regulated as gambling.
It’s nonetheless a particularly precarious moment in time for prediction markets, following the Democratic party’s major victory last week. Lawmakers on the left are already “gearing up for an aggressive oversight regime,” as Politico reports, vowing to rein in prediction markets.
How long Kalshi can hold the line and sell regulators on the argument that betting on the outcomes of sports games isn’t gambling remains to be seen.
It’s also unclear whether Bright will be able to recover his losses after his disastrous betting spree. As Ars points out, Washington had already won a court order to restrict Kalshi’s “illegal gambling operation” — but the order took effect after Bright lost over $300,000.
Bright is only a small part of what experts are warning is an epidemic of gambling addiction in the United States, facilitated by the surge in prediction platforms. And considering that even fortune cookies now come with prediction platform ads, it’s no wonder gambling addiction is spiraling “out of control.”.
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