1
`
`
`IN THE UNITED STATES DISTRICT COURT
`
`FOR THE
`MIDDLE
`
`DISTRICT OF
`ALABAMA
`
`NORTHERN DIVISION
`
`
`CHRISTOPHER JENNINGS
`,
`
`individually and on behalf of all others
`similarly situated
`
`
`Plaintiff,
`
`
`v.
`
`
`KALSHI INC., KALSHIEX LLC,
`KALSHI KLEAR INC., KALSHI
`KLEAR LLC, KALSHI TRADING LLC
`,
`SUSQUEHANNA INTERNATIONAL
`GROUP, LLP, AND SUSQUEHANNA
`GOVERNMENT PRODUCTS, LLP,
`
`
`Defendant
`s
`.
`
`
`Case No.
`
`
`
`CLASS ACTION COMPLAINT
`
`
`
`
`JURY TRIAL DEMANDED
`
`Plaintiff
`Christopher Jennings
`, by and through
`the undersigned counsel
`,
`brings this action against Defendants Kalshi Inc., KalshiEX
`
`LLC, Kalshi Klear Inc.,
`Kalshi Klear LLC, Kalshi Trading LLC
`, Susquehanna International Group, LLP,
`and Susquehanna Government Products, LLP
`(together, “Kalshi” or “Defendants
`”)
`for
`
`running an illegal online gambling enterprise in violation of
`Alabama
`l
`aw, and
`alleges as follows:
`
`INTRODUCTION
`
`1.
`
`This action seeks declaratory
`and
`
`injunctive relief and
`damages
`
`against
`Kalshi for evading
`Alabama
`
`gaming laws by offering
`illegal
`,
`unconstitutional
`, and
`Case 2:26-cv-00071-RAH-SMD Document 1 Filed 01/29/26 Page 1 of 40
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`
`
`
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`2
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`
`untaxed sports betting on its mobile app and website throughout
`the State of
`Alabama
`.
`
`2.
`
`Gambling causes many social and familial harms, including “financial
`stress, relationship breakdown, family violence, mental illness and suicide.”
`1
`
`Even
`more, “[t]he legacy of gambling harm can endure throughout one’s life and transmit
`intergenerationally.”
`2
`
`3.
`
`Sports betting in particular is appealing, and in many cases targeted, to
`minors.
`3
`
`
`4.
`
`Kalshi is no different, and in fact it permits (and encourages) users
`under the age of 21 to wager on sporting outcomes.
`4
`
`5.
`
`To protect its residents from these harms,
`Alabama
`
`prohibits
`gambling
`-
`related activities within its borders.
`
`6.
`
`Namely,
`Alabama’s
`
`Constitution outlaws it and
`—
`more than that
`—
`strips the Alabama Legislature of any power to enact a law which would otherwise
`allow gambling.
`
`See
`
`Ala. Const. art. IV, § 65.
`
`7.
`
`More specifically
`,
`
`Alabama
`
`does
`
`“
`not currently allow legal, online
`sports betting through traditional sports books. That has been a deliberate choice,
`
`1
`
`https://www.who.int/news
`-
`room/fact
`-
`sheets/detail/gambling
`
`
`2
`
`Id
`.
`
`3
`
`https://www.cbc.ca/news/health/youth
`-
`sports
`-
`betting
`-
`advertisements
`-
`enticing
`-
`doctors
`-
`1.7627752
`
`
`4
`
`https://gamblingharm.org/kalshi
`-
`college
`-
`ambassadors
`-
`program/
`
`
`Case 2:26-cv-00071-RAH-SMD Document 1 Filed 01/29/26 Page 2 of 40
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`3
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`shaped by our laws, our values, and the voices of Alabama voters.”
`5
`
`8.
`
`Kalshi, however, believes it is above
`Alabama
`
`law.
`
`9.
`
`Specifically, Kalshi operates a “prediction market” in
`Alabama
`whereby
`Alabama
`residents can
`
`buy and sell “event contracts” related to, among
`other things, sporting outcomes
`
`all while
`not register
`ing
`
`to do business in Alabama
`
`or paying any
`
`taxes to the State of Alabama.
`
`
`10.
`
`And w
`hile cleverly disguised as unique securities and/or commodities
`
`purportedly regulated by the CFTC
`, these event contracts are
`
`nothing more
`
`thinly
`veiled illegal wagers based on the outcome of specific future events (e.g., whether a
`sports team will win or lose), as the figure
`s
`
`below reflect:
`
`
`5
`
`https://www.al.com/politics/2026/01/alabama
`-
`should
`-
`decide
`-
`its
`-
`own
`-
`future
`-
`on
`-
`sports
`-
`betting
`-
`op
`-
`ed.html
`
`Case 2:26-cv-00071-RAH-SMD Document 1 Filed 01/29/26 Page 3 of 40
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`4
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`11.
`
`Not only can
`Alabama
`
`residents bet on who will win the game, but
`Kalshi also provides other traditional sports gambling offerings, such as the outcome
`of the point spread, total combined points, and prop bets (such as the total number
`of
`touchdowns
`
`a player may accumulate), as the image below reflects:
`
`
`Case 2:26-cv-00071-RAH-SMD Document 1 Filed 01/29/26 Page 4 of 40
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`5
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`12.
`
`Kalshi claims its offerings are legal because they are simply “futures”
`or “swaps” or “options” intended to hedge financial risks.
`
`But Kalshi has admitted
`there is no sports contracts “serve no commercial purpose at all.” And at this point,
`m
`any c
`ourts across the country
`have
`
`rejected Kalshi’s
`word play game.
`
`13.
`
`In fact, many courts have issued injunctions prohibiting the Kalshi from
`offering sports “contracts” in
`
`their states.
`
`
`14.
`
`Alabama
`residents
`, including Plaintiff,
`
`regularly gamble large sums of
`money on Kalshi’s platform
`
`based on Kalshi’s misrepresentation that it is legal in
`Alabama.
`
`15.
`
`Kalshi has operated in
`Alabama
`
`for years, raking in tens to hundreds of
`millions of dollars from
`Alabama
`residents
`, including Plaintiff
`. In fact, Kalshi is
`estimated to be valued at $5 billion,
`mostly
`by offering illegal, unregulated, and
`untaxed sports betting, including in
`Alabama
`.
`
`16.
`
`Through this action,
`Plaintiff
`
`seeks to enforce
`Alabama’s strong,
`constitutional
`
`prohibition against sports gambling by permanently enjoining Kalshi
`from offering its services in
`Alabama
`and
`seeking damages under
`Alabama’s
`Loss
`Recovery Statute
`.
`
`
`
`
`Case 2:26-cv-00071-RAH-SMD Document 1 Filed 01/29/26 Page 5 of 40
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`6
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`JURISDICTION AND VENUE
`
`17.
`
`
`This Court has diversity jurisdiction under 28 U.S.C. § 1332(d), as the
`amount in controversy exceeds $5,000,000 and Plaintiff and at least one Class
`member are citizens of a different state than Defendants.
`
`18.
`
`Venue is proper in this District under 28 U.S.C. § 1391 because
`Defendants are deemed to reside in any district where they are subject to personal
`jurisdiction. Plaintiff wagered
`money or other things of value on Kalshi
`
`in this
`District, and Defendants marketed, advertised, and accepted wagers here. Thus, a
`substantial portion of the events giving rise to the claims occurred within this
`District.
`
`19.
`
`The Court also has personal jurisdiction over Defendants
`because
`Defendants do substantial business and transactions in Alabama, Plaintiff’s claims
`arise from those Alabama contacts, and it would not offend traditional notions of fair
`play and substantial justice for Defendants to defend themselves in Alabama.
`
`20.
`
`More specifically,
`Kalshi operates a highly interactive website within
`the State of Alabama.
`
`21.
`
`Kalshi.com
`operates
`
`continuously and is designed to generate
`substantial revenue for Defendants year
`after
`
`year.
`
`Case 2:26-cv-00071-RAH-SMD Document 1 Filed 01/29/26 Page 6 of 40
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`7
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`22.
`
`Unlike passive websites, Kalshi.com requires users to create accounts,
`allows users to engage in gambling (including sports betting), and invites users to
`contact Kalshi directly through the website.
`
`
`23.
`
`Through this process, Defendants seek to form contracts with Alabama
`residents, including Plaintiff
`, and transact with Alabama residents, including
`Plaintiff
`.
`
`24.
`
`Kalshi actively advertises and solicits Alabama residents to create
`accounts and participate in gambling on the Kalshi.com.
`In fact, Kalshi has paid
`Al.com
`to promote Kalshi.com.
`6
`
`25.
`
`Kalshi
`
`also
`
`uses geo
`‑targeted digital advertisements, banner ads,
`search
`‑engine optimization efforts aimed at increasing visibility on search engine
`results pages, and direct email outreach.
`
`26.
`
`Kalshi enables continuous commercial interactions between Alabama
`residents and
`Defendants
`
`by tracking their geographic location using tools such as
`GPS, Wi
`‑Fi, wireless network triangulation, transaction location, and IP addresses.
`
`27.
`
`This information is used to
`
`“tailor
`. . .
`
`product offerings” and
`provide
`each Alabama resident a more “personalized and enhanced user experience.”
`7
`
`
`
`6
`
`https://www.al.com/betting/kalshi
`-
`promo
`-
`code/
`;
`see also
`Ex. 1.
`
`7
`
`https://kalshi.com/privacy
`-
`policy
`
`(last visited Jan. 28, 2026)
`;
`see also
`Ex. 2.
`
`Case 2:26-cv-00071-RAH-SMD Document 1 Filed 01/29/26 Page 7 of 40
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`8
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`28.
`
`Kalshi also uses these tracking technologies to measure the
`effectiveness of its marketing efforts and provide “advertisements based on your
`interests an
`d
`
`activities on [Kalshi.]”
`8
`
`
`29.
`
`These activities and advertisements serve one purpose: to reach into
`Alabama and encourage Alabama residents to register accounts and engage in online
`gambling activities
`
`for Defendants’ profit.
`
`30.
`
`Once Alabama residents complete the registration process, Kalshi
`contacts Alabama residents directly to, among other things, answer questions or
`comments, deliver newsletters
`,
`make suggestions and recommendations based on
`your captures data, and respond to users who have contacted Kalshi regarding
`employment opportunities.
`
`31.
`
`Importantly, Kalshi will also
`directly contact users who owe money on
`the
`website.
`9
`
`This
`active collection
`
`plac
`es
`
`Kalshi in the position of initiating
`financial contact within the state rather than merely operating
`
`a
`
`passive
`
`online
`platform.
`
`Kalshi’s
`
`conduct is akin to how a traditional bookmaker pursues bettors to
`collect winnings or settle
`
`accounts.
`A
`ccordingly
`, Kalshi’s conduct
`moves it contacts
`with Alabama
`beyond passive facilitation and into a realm of purposeful, targeted
`financial interaction with
`Alabama residents
`.
`
`
`8
`
`Id
`.
`
`9
`
`Id
`.
`
`Case 2:26-cv-00071-RAH-SMD Document 1 Filed 01/29/26 Page 8 of 40
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`9
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`32.
`
`Kalshi
`also
`knowingly accept
`s
`
`payments from Alabama bank accounts
`and debit/credit cards to place wagers on the Kalshi.com.
`
`33.
`
`Kalshi operates
`for
`
`the benefit of all Defendants, who are affiliated
`and
`together
`
`operate solely to
`derive substantial revenue from their continuous and
`systematic contacts with Alabama
`
`and transactions with Alabama residents
`.
`
`34.
`
`Kalshi
`
`also obtain
`s
`
`user information from third parties, like Google and
`Facebook to track users’ “to tailor [Kalshi’s] advertisements and content to you.”
`10
`
`35.
`
`Kalshi also operates as a market maker, where it will transact and
`attempt to
`contract with Alabama residents on certain sporting events
`, profiting from
`those purported contracts and transactions.
`
`36.
`
`Not only did Defendant
`Susquehanna
`
`benefit from Kalshi’s substantial
`contacts with Alabama, but it, acting as a market maker,
`attempted
`contract directly
`with Alabama residents on certain wagers, and profited from those
`
`purported
`
`contracts and transactions.
`
`37.
`
`Throughout the relevant time period, Defendants systematically
`conducted and continue to conduct business in Alabama.
`
`38.
`
`It was foreseeable, and intended, that Alabama residents would use
`Kalshi.com, as Defendants were well aware that Alabama customers regularly
`participated in online gambling through the website.
`
`
`10
`
`Id
`.
`
`Case 2:26-cv-00071-RAH-SMD Document 1 Filed 01/29/26 Page 9 of 40
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`10
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`39.
`
`Defendants profit substantially from Alabama users, who make up a
`significant portion of their customer base.
`
`40.
`
`Defendants
`
`reached into Alabama, advertised in Alabama, invited
`Alabama residents to participate in gambling on Kalshi.com
`, and transacted with
`Alabama residents
`. By doing so,
`Defendants
`
`purposefully availed themselves of the
`privilege of conducting business in Alabama.
`
`PARTIES
`
`
`Plaintiff
`
`41.
`
`Plaintiff
`Christopher Jennings
`
`is
`an Alabama
`citizen and resident of
`Millbrook, Alabama
`. Plaintiff created a Kalshi account
`in
`Alabama
`using
`his
`
`Alabama
`address and bank account. Plaintiff
`h
`as placed sports wagers on Kalshi
`in
`Alabama
`.
`
`Defendant
`s
`
`
`42.
`
`Defendant Kalshi Inc.
`
`is a Delaware corporation headquartered at 594
`Broadway Rm 407, New York City, New York 10012. On information and belief, it
`is the parent company of all other Kalshi entities and operates a prediction market
`whereby
`Alabama
`residents can place illegal wagers on the outcome of sporting
`events.
`
`43.
`
`Defendant KalshiEX LLC
`
`is a Delaware corporation headquartered at
`594 Broadway Rm 407, New York City, New York 10012. On information and
`Case 2:26-cv-00071-RAH-SMD Document 1 Filed 01/29/26 Page 10 of 40
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`
`
`
`
`
`
`11
`
`
`belief, it is a wholly owned subsidiary of Kalshi Inc. that operates a commodities
`exchange and prediction market whereby
`Alabama
`residents can place illegal wagers
`on the outcome of sporting events.
`
`44.
`
`Defendant Kalshi Klear Inc.
`
`is a Delaware corporation headquartered
`at 594 Broadway Rm 407, New York City, New York 10012. On information and
`belief, it is a wholly owned subsidiary of Kalshi Inc. that operates a registered
`derivatives clearing organization and prediction market whe
`reby
`Alabama
`residents
`can place illegal wagers on the outcome of sporting events.
`
`45.
`
`Defendant Kalshi Klear LLC
`
`is a Delaware corporation
`headquartered at 594 Broadway Rm 407, New York City, New York 10012. On
`information and belief, it is a wholly owned subsidiary of Kalshi Inc. that operates a
`registered derivatives clearing organization and prediction market whe
`reby
`Alabama
`residents can place illegal wagers on the outcome of sporting events.
`
`46.
`
`Defendant Kalshi Trading LLC
`
`is a Delaware corporation
`headquartered at 594 Broadway Rm 407, New York City, New York 10012. On
`information and belief, it is a wholly owned subsidiary of Kalshi Inc. that operates
`as a market maker for Kalshi’s prediction market (
`creating,
`buying
`,
`
`and selling event
`contracts on the platform) whereby
`Alabama
`residents can place illegal wagers on
`the outcome of sporting events.
`It undertakes “bookmaking” in violation of
`Ala.
`Code § 13A
`-
`12
`-
`20
`,
`et seq.
`
`
`Case 2:26-cv-00071-RAH-SMD Document 1 Filed 01/29/26 Page 11 of 40
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`12
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`47.
`
`Defendant Susque
`hanna International Group LLP
`
`is a Delaware
`corporation headquartered at 401 City Avenue Suite 220, Bala Cy
`nwyd,
`Pennsylvania 19004.
`On information and belief, it is the parent company of all
`Susquehanna entities. As relevant, Susquehanna serves as a market maker for Kalshi,
`creating, buying, and selling event contracts
`
`on the platform.
`It undertakes
`“bookmaking” in violation of
`Ala. Code § 13A
`-
`12
`-
`20,
`et seq.
`
`48.
`
`Defendant Susquehanna Government Products, LLP
`
`is a foreign
`limited partnership incorporated in Delaware and headquartered at 80 State Street,
`Albany, New York 12207. On information and belief, it is a wholly owned
`subsidiary of Susquehanna International Group LLP.
`As relevant, Susquehanna
`serves as a market maker for Kalshi, creating, buying, and selling event contracts on
`the platform.
`
`It undertakes “bookmaking” in violation of
`Ala. Code § 13A
`-
`12
`-
`20,
`et
`seq.
`
`FACTUAL ALLEGATIONS
`
`I.
`
`Prediction Markets
`–
`
`How They Work
`
`49.
`
`Prediction markets allow people to bet on the outcome of future events,
`such as sports, elections or weather, through online platforms.
`11
`
`50.
`
`According to Kalshi:
`
`The NYSE and Kalshi both deal in markets, but with a key difference:
`what's being traded. The NYSE is a traditional stock exchange where
`
`11
`
`https://wifpr.wharton.upenn.edu/blog/a
`-
`primer
`-
`on
`-
`prediction
`-
`markets/
`
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`Case 2:26-cv-00071-RAH-SMD Document 1 Filed 01/29/26 Page 12 of 40
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`13
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`you buy and sell shares of ownership in companies. Kalshi, on the other
`hand, is a prediction market. Here, you trade contracts based on whether
`specific events will happen, like "Will interest rates rise in the next
`quarter?" Think of it like predicting t
`he future, with the price of the
`contracts reflecting the collective prediction of the market
`participants.
`12
`
`51.
`
`Kalshi admits it is an “exchange where you can buy and sell contracts
`on the outcome of events.”
`13
`
`
`52.
`
`In fact, Kalshi even admits it is chance based
`–
`
`the hallmark of illegal
`gambling.
`14
`
`53.
`
`To participate, users must be 18 years or older and create an account by
`providing “basic personal information” such as name, age, and address, and in many
`cases submit documents verifying the personal information presented.
`15
`
`54.
`
`When creating an account, there are no terms or conditions linked
`below the registration process
`.
`
`55.
`
`After an account is created, u
`sers must then fund their account with
`either debit or credit card deposits, bank deposits, crypto deposits, or direct wire
`deposits.
`16
`
`
`12
`
`https://help.kalshi.com/kalshi
`-
`101/what
`-
`are
`-
`prediction
`-
`markets
`;
`see also
`Ex. 3.
`
`13
`
`https://help.kalshi.com/kalshi
`-
`101/what
`-
`are
`-
`prediction
`-
`markets
`
`
`14
`
`Id
`
`
`15
`
`https://help.kalshi.com/account/signing
`-
`up/signing
`-
`up
`-
`as
`-
`an
`-
`individual
`;
`see also
`Ex. 4.
`
`16
`
`https://help.kalshi.com/transfer
`-
`funds/deposit
`-
`funds
`;
`see also
`Ex. 5.
`
`Case 2:26-cv-00071-RAH-SMD Document 1 Filed 01/29/26 Page 13 of 40
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`
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`
`
`
`
`14
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`
`56.
`
`After a user creates and funds an account, they are free to start betting
`on the outcome of many events, from sports to politics to pop culture.
`
`57.
`
`Most wagers are priced between 1 cent and $1, and bettors take a “yes”
`or “no” position. When the outcome of the event is verified, the contract pays out
`whoever
`
`guessed correctly
`.
`
`58.
`
`Once the winners are determined, they receive a cash payout that can
`be transferred to their bank accounts or crypto wallets, among other things.
`17
`
`II.
`
`Defendants Operate as Bookmakers, Providing Vital Liquidity on Kalshi
`
`59.
`
`Like any gambling enterprise, for
`
`Kalshi
`to offer event contracts
`successfully, it needs sufficient liquidity.
`
`60.
`
`To obtain that liquidity, Kalshi uses market makers, such as
`Defendants
`Kalshi Trading LLC,
`Susquehanna International Group, LLP, and Susquehanna
`Government Products, LLP
`.
`As explained in more detail below, these market makers
`operate like traditional bookmakers (or “bookies”).
`
`61.
`
`Market Makers set probabilities for future events on Kalshi by buying
`what they consider to be
`undervalued
`
`event contracts
`
`and selling
`event contracts that
`
`they consider
`to
`
`be
`overvalued.
`
`62.
`
`By performing these actions,
`the event contract prices are brought to an
`equilibrium
`
`reflecting all publicly available information.
`This process ensures that
`
`17
`
`https://help.kalshi.com/transfer
`-
`funds/withdraw
`-
`funds
`;
`see also
`Ex. 6.
`
`Case 2:26-cv-00071-RAH-SMD Document 1 Filed 01/29/26 Page 14 of 40
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`15
`
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`there is enough price movement to set
`t
`he “Yes” and “No” options for wagers exactly
`equal to $1.00, which is a
`requirement
`
`for
`transacting over event contracts on Kalshi.
`
`63.
`
`Kalshi’s own website
`admits
`
`that market makers play a vital role in
`propping
`
`up its
`prediction market.
`
`64.
`
`A
`s an illustration, a
`
`market maker on Kalshi is like a carnival booth
`worker who always stands ready to buy or sell tickets for a game predicting whether
`an event will happen. Even if no one else is in line, the worker will still take your
`trade, ensuring you can buy a YES tic
`ket or sell a NO ticket instantly. By constantly
`offering both sides, the worker keeps the game flowing smoothly, preventing stalls
`when the crowd is imbalanced.
`
`65.
`
`Market makers on Kalshi operate much like
`the
`booth worker: they
`stand ready to buy and sell so that other participants can always find a counterparty.
`By continuously providing both “Yes” and “No” contracts, they keep the market
`liquid and prices moving smoothly. In some cases, the pricing of those c
`ontracts
`allows a market maker to take opposite positions that cancel out any risk
`,
`essentially
`guaranteeing a small profit no matter how the event turns out.
`T
`his type of
`arrangement
`represents what a recent l
`etter to the CFTC described as
`
`a “riskless
`principal transaction
`.”
`
`66.
`
`To obtain
`additional
`
`profits
`, market makers will choose to favor one
`side of the ledger, providing liquidity to the
`market
`
`but taking on a balance
`-
`sheet
`Case 2:26-cv-00071-RAH-SMD Document 1 Filed 01/29/26 Page 15 of 40
`
`
`
`
`
`
`
`16
`
`
`risk. Should the market maker wager incorrectly, it
`risks
`
`losing its money. To
`minimize this risk, market makers employ
`dedicated
`
`research teams,
`proprietary
`
`statistical
`
`models, an
`d
`
`superior
`
`data and software. These tools allow them to estimate
`future
`
`events
`with greater accuracy than any individual gambler on Kalshi could
`hope for.
`
`67.
`
`Additionally,
`market makers gain advantages through their distinct
`contractual arrangements and technological integration with prediction markets.
`These advantages include “financial benefits, recued fees, differing positions limits,
`and enhances access.”
`
`These advantages greatly reduce market makers’ financial
`exposure. As a result, wagering against individual gamblers is almost all upside for
`them.
`
`68.
`
`Between these two sorts of wagers, Market makers capture nearly all
`potential arbitrage opportunities on Kalshi and similar prediction markets. As a
`result, it is nearly impossible for individual gamblers to achieve profits from
`gambling on Kalshi, even be
`fore considering Kalshi’s alleged “transaction fees.”
`
`69.
`
`Empirical research supports this conclusion; studies indicate that only
`approximately 3% of sports
`betters
`
`earn annual profits, while the remaining 97%
`experience losses.
`
`Case 2:26-cv-00071-RAH-SMD Document 1 Filed 01/29/26 Page 16 of 40
`
`
`
`
`
`
`
`17
`
`
`70.
`
`Moreover, much of the apparent success among profitable gamblers can
`be attributed to survivorship bias, the statistical inevitability that some individuals
`will occasionally win given sufficient time.
`
`71.
`
`Similar findings have been reported for betting on other uncertain
`future events, including music, pop culture, and world affairs. Kalshi acknowledges
`these results; for example, its founder and CEO, Tarek Monsour, has noted that
`“Kalshi is already the mos
`t accurate forecast for federal interest rates.”
`
`72.
`
`In all relevant aspects,
`the market makers here operate just like
`traditional sportsbooks. And that is unsurprising.
`
`Traditional sportsbooks are a type
`of market maker, one that is focused only on event contact for sports
`-
`related events.
`
`73.
`
`Just
`like traditional sportsbooks, event
`-
`contract market makers can
`secure risk
`-
`free profits by
`arbitraging
`
`the “bid
`-
`ask spread,” by
`capitalizing
`
`on the
`gap between buying prices and selling prices of certain wages.
`
`74.
`
`Additionally, just like traditional
`sportsbooks, market makers are large
`institutional
`
`investors with large teams, sophisticated models, and
`extensive
`
`resources
`, and
`enjoy privileged status as a result of their contractual and
`technological integration with the platform itself.
`
`75.
`
`Furthermore,
`
`just as with traditional sportsbooks, event
`-
`contract m
`arket
`
`makers will sometimes
`risk
`
`their own
`capital
`
`by committing it to one side of the
`Case 2:26-cv-00071-RAH-SMD Document 1 Filed 01/29/26 Page 17 of 40
`
`
`
`
`
`
`
`18
`
`
`ledger, putting them in direct competition with individual gamblers
`. In other words,
`the market maker is either a winner or loser of the wager.
`
`76.
`
`It doesn’t matter that wagers on Kalshi
`usually offer percentages, rather
`than traditional betting lines. This is simply a
`distinction
`
`with
`out
`
`a difference.
`
`77.
`
`For example,
`if the
`Alabama Crimson Tide football team was
`listed as
`a
`-
`400 favorite to win the Iron Bowl
`, they would also be listed as 80% favorites to
`win on prediction markets like Kalshi.
`These two figures are simply different
`mathematical ways of expressing the same probability.
`Indeed, one leading sports
`-
`betting website encourages gamblers to convert sportsbooks’ betting lines into
`probabilities (like the ones Kalshi uses) to assist them in calculating expected value.
`
`78.
`
`According to information published on Kalshi’s own website, market
`makers account for the overwhelming majority of total spending on Kalshi event
`contracts. This means that when Alabama residents place a bet on Kalshi, they are
`almost always matched agains
`t a market maker.
`
`79.
`
`Therefore, even though Kalshi technically serves as the direct
`counterparty for every trade on its platform (and thus
`is
`
`seen as a “winner” of
`
`the
`
`bettors’ money), market makers also act as counterparties, regardless of whether
`they are exposed to balance
`-
`sheet risk. Since individual bettors cannot compete with
`the expertise, advanced analytics, and resources that market makers possess, they
`are at
`a disadvantage and lose expected value with each event contract they purchase.
`
`Case 2:26-cv-00071-RAH-SMD Document 1 Filed 01/29/26 Page 18 of 40
`
`
`
`
`
`
`
`19
`
`
`80.
`
`Prediction markets and market makers are not always separate entities.
`KalshiEX’s rulebook acknowledges that Kalshi Trading LLC may be a member of
`the prediction market, meaning that it is able to place
`trades on individual wagers,
`thereby placing bets directly with Alabama residents.
`
`81.
`
`A recent article confirms
`that
`
`“Kalshi is also doing some of its own
`market making through a separate entity called Kalshi Trading.” In other words,
`Kalshi does not merely own and operate
`a
`
`prediction
`platform
`, it also
`participates
`in
`the gambling
`transactions
`
`as a better,
`thereby driving gambling on the platform.
`
`82.
`
`In this way, Kalshi pits itself directly against individual
`users, including
`Alabama residents.
`
`This is just one aspect
`in which Kalshi qualifies itself as a
`gambling “winner.”
`
`83.
`
`Another way Kalshi qualifies itself as a
`gambling
`
`“winner” is b
`y
`actively reaching out to users who owe money on its platform
`
`to collect
`.
`18
`
`This
`conduct positions
`Kalshi itself as a clear winner in the context of gambling, much
`like a traditional bookmaker. Rather than simply operating as a passive online
`service, Kalshi’s proactive approach to collecting debts mirrors the conduct of
`bookmakers who pursue bettors to
`
`settle accounts or claim winnings.
`
`
`18
`
`https://kalshi.com/privacy
`-
`policy
`
`(last visited Jan. 28, 2026).
`
`Case 2:26-cv-00071-RAH-SMD Document 1 Filed 01/29/26 Page 19 of 40
`
`
`
`
`
`
`
`20
`
`
`84.
`
`However, to provide
`further
`liquidity, Kalshi also partners with certain
`hand
`-
`select
`
`third
`-
`party
`market
`
`makers.
`The most notable of these is Susquehanna,
`which in April 2024 became the first external institutional market maker on Kalshi.
`
`85.
`
`Despite being
`separate legal entities, market makers like Susquehanna
`are no
`t
`
`financially independent of Kalshi
`. Rather, they are Kalshi’s business
`partners, contracting
`directly
`
`with Kalshi to provide
`liquidity
`
`to its prediction
`market. In exchange, they receive numerous financial and non
`-
`financial kickbacks.
`In this respect, all Defendants are working in concert to make illegal,
`unconstitutional, and unre
`gul
`ated gambling available within the State of Alabama.
`
`86.
`
`Kalshi confirms this
`relationship
`
`with market makers on its w
`ebsite
`when it
`acknowledges
`
`that “applicants undergo a thorough review process
`evaluating
`
`their
`financial
`
`resources, relevant experience, and overall business
`reputation,” and
`“[o]nly those demonstrating exceptional qualifications are granted
`market maker status.
`”
`
`87.
`
`Kalshi further acknowledges that, as a reward for operating as a market
`maker on Kalshi
`, market makers receive
`benefits
`
`from Kalshi, “including but not
`limited to
`financial
`
`benefits, reduced fees, differing position limits, and
`enhanced
`
`access
`,” n
`one of
`which is available to the general public.
`
`88.
`
`As a result of this
`symbiotic
`relationship,
`marker makers are left with a
`decided advantage when using Kalshi’s platform
`, ensuring that they profit at the
`Case 2:26-cv-00071-RAH-SMD Document 1 Filed 01/29/26 Page 20 of 40
`
`
`
`
`
`
`
`21
`
`
`expense of others, while Kalshi
`’s platform
`
`continues to
`possess the necessary
`liquidity to operate.
`
`89.
`
`Based upon the investigation made by the undersigned attorneys,
`Alabama residents have repeatedly placed illegal, unconstitutional, and unregulated
`event contracts supported by liquidity provided by institutional market makers,
`including Kalshi Trading LLC and Susquehanna.
`
`90.
`
`Because t
`he Alabama residents’ funds flowed to these market makers,
`they are “winners” for purposes
`of the Ala. Code §§ 8
`-
`1
`-
`150,
`et seq
`.
`
`III.
`
`Defendants’ Conduct
`i
`s Illegal
`i
`n Alabama
`
`91.
`
`It is illegal to offer unlicensed gambling, especially sports gambling, in
`Alabama
`.
`
`92.
`
`And the CFTC does not override Alabama law
`,
`
`as the Commodities
`Exchange Act
`prohibits
`
`the CFTC from permitting “contracts” that are “contrary to
`the public interest” such as contracts based on “gaming.”
`See
`17 CFR § 40.11.
`
`93.
`
`Though the CFTC has not defined gaming (if the Court is even bound
`by the CFTC’s definition)
`, Kalshi has.
`
`94.
`
`For example
`, Kalshi once admitted
`
`to the D.C. Circuit that
`
`“[t]
`he classic
`example is a contract on the outcome of a sporting event; as the legislative history
`directly confirms, Congress did not want sports betting to be conducted on
`derivatives markets
`,
`”
`
`like those provided by Kalshi.
`
`KALSHIEX LLC, Plaintiff
`-
`Case 2:26-cv-00071-RAH-SMD Document 1 Filed 01/29/26 Page 21 of 40
`
`
`
`
`
`
`
`22
`
`
`Appellee, v. COMMODITY FUTURES TRADING COMMISSION, Defendant
`-
`Appellant., 2024 WL 4802698, at *41
`.
`
`95.
`
`Kalshi further admitted that “[e]
`vidently, Congress sought to prevent
`exchanges
`
`[like Kalshi]
`
`from facilitating casino
`-
`style or sports gambling. On a
`policy level, that makes some sense: The basic purpose of Designated Contract
`Markets is to allow
`‘
`hedging
`’
`
`of economic risk.
`”
`Id
`. at *45.
`
`96.
`
`Kalshi even admitted that “
`the word
`‘
`gaming
`’
`
`on its face
`--
`and in accord
`with its legislative history
`--
`is concerned with casino gambling and sports
`
`. . ..”
`Id
`. at
`*50.
`
`97.
`
`Kalshi has
`
`also
`admitt
`ed
`
`that
`, among other things,
`
`there are “[t]
`hree
`examples of gaming contracts: Football, horseracing, golf. They're all games. It's
`something that has no inherent economic significance. It’s something done for
`amusement. It may be done purely to facilitate the betting itself for its own sake
`,”
`and even “[t]
`he ‘gaming’ category reaches contracts contingent on games
`—
`for
`example, whether a certain team will win the Super Bowl. It thus functions as a
`check on attempts to launder sports gambling through the derivatives markets
`.”
`19
`
`98.
`
`Naturally, one may question what this lawsuit is all about
`considering
`
`these clear, unequivocal admissions.
`
`
`19
`
`https://www.linkedin.com/posts/daniel
`-
`wallach
`-
`a959a77_kalshis
`-
`prior
`-
`judicial
`-
`admissions
`-
`both
`-
`activity
`-
`7338273722673295360
`-
`53XG/
`
`
`Case 2:26-cv-00071-RAH-SMD Document 1 Filed 01/29/26 Page 22 of 40
`
`
`
`
`
`
`
`23
`
`
`99.
`
`Well, Kalshi pivoted.
`Kalshi
`
`now
`
`ignores its prior inconsistent
`statement
`s
`
`and boldly claims it:
`
`is regulated by the Commodity Futures Trading Commission (CFTC)
`–
`
`an independent agency of the US government that has regulated US
`derivatives markets since 1974 and is overseen by Congress. Kalshi is
`regulated as a Designated Contract Market (DCM), which
`is a financial
`exchange designated to trade futures, swaps, and/or options on
`commodities.
`
`
`100.
`
`Bu
`t
`
`this Court need not turn a blind eye to Kalshi’s past statements.
`
`101.
`
`Nor does the CFTC preempt Alabama’s constitutional prohibition
`against gambling.
`
`102.
`
`Authorities suggest that the CFTC preempts events based on
`occurrences, not outcomes.
`
`103.
`
`But a
`s several courts have held, Kalshi’s “contracts”
`outcomes because
`it
`
`“self
`-
`certified to the CFTC [that] these contracts turn on the outcome of the live
`event, not on the ‘occurrence, nonoccurrence, or the extent of the occurrence’ of a
`live event.’”
`See North American Derivatives Exchange, Inc., v. The State of Nevada,
`et al
`., 25
`-
`cv
`-
`00978
`-
`APG
`-
`BNW, Dkt. 105 (D. Nev.).
`
`104.
`
`Under this framework, this case can be resolved with judicially
`noticeable statements. On the one hand, Kalshi admitted that event contracts under
`the CFTC do not
`–
`
`and cannot
`–
`
`cover sporting events.
`See
`¶¶ 94
`-
`99,
`supra
`. And on
`the other, Kalshi admits, very frequently, that its sports event “contracts” are based
`on the outcome of the event.
`See infra
`.
`
`Case 2:26-cv-00071-RAH-SMD Document 1 Filed 01/29/26 Page 23 of 40
`
`
`
`
`
`
`
`24
`
`
`105.
`
`For example, when explaining