Star Spangled Gamblers

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"The top 1 percent of American households, which have a minimum net worth of $11.1 million, now collectively own about $25.6 trillion worth of stocks and mutual funds, the same amount as the remaining 99% of the country," per the Federal Reserve

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It takes an army of lawyers. Firms from 4 different states.

". . . the Kalshi Defendants knew Sporting Event Contracts were prohibited and acted in bad faith with a self-interested motive, prioritizing revenue generation and market expansion over statutory and regulatory duties."

"Considering the plain language of the regulatory prohibition, the Kalshi Defendants’ own prior judicial admissions, their continued operation despite enforcement actions, their targeting of vulnerable populations, and their deceptive advertising, . . ."

"These misleading advertisements demonstrate the Kalshi Defendants’ knowledge that they are operating a sports betting platform and their intent to circumvent state and federal gaming regulations."

"Studies indicate that 58% of 18- to 22-year-olds gamble on sports each year, with roughly 10% gambling weekly and 4% daily. Problem gambling among this demographic carries severe consequences, including financial ruin and elevated suicide risk."

"The Kalshi Defendants have employed aggressive marketing tactics targeting college students and users aged 18 to 20, including a “College Ambassadors” program designed to promote gambling on campuses."

"The Kalshi Defendants also target vulnerable populations, particularly users aged 18 to 20, in states where sports gaming is restricted to those 21 and older, demonstrating an improper profit motive without consideration for the legal or regulatory consequences."

"The Kalshi Defendants’ continued operation despite repeated state enforcement actions demonstrates their knowledge of the prohibited nature of the Sporting Event Contracts and their willful disregard of regulatory requirements."

"The Kalshi Defendants and the Executive Officer Defendants profited massively from these Sporting Event Contracts through revenues generated by and fees associated with trading, clearing, and platform activity, to the detriment of Plaintiff and putative Class Members."

"The Executive Officer Defendants knowingly directed, approved, enabled, and oversaw the design, listing, clearing, compliance, and continued operation of prohibited Sporting Event Contracts, thereby willfully aiding, abetting, and inducing Kalshi's violations of the CEA."

"As the DCM, KalshiEX LLC created the prohibited Sporting Event Contracts, established their terms and conditions, and made them available for trading thereby implementing and enforcing exchange rules that violated CFTC Rule 40.11 and the CEA, as alleged in Count I."

In addition, the private right of action is limited to situations where the exchange “acted in bad faith.” 7 U.S.C. § 25(b)(4).

Espinal v. CME: "Section 25 provides a private right of action against a 'contract market' or exchange. Broadly speaking, § 25(b)(1)(A) imposes liability for actual losses resulting from the failure to enforce any by-law, rule, regulation, or resolution required to be enforced."

Here's the pertinent statutory language in the CEA (7 U.S.C. § 25) that provides a private right of action against DCMs and their officers for violating CFTC regulations that are required to be enforced pursuant to section 7a-2 of the CEA (which encompasses Rule 40.11(a)(1)):

"In other words, the CEA gives a private right of action for listing and clearing the Sporting Event Contracts at issue in this case."

"The CEA provides a private right action against DCMs, DCOs, and their executive officers for violating or failing to enforce rules, regulations, bylaws, and resolutions that the CEA requires to be enforced, including Rule 40.11."

"Moreover, the Kalshi Defendants aggressively marketed their Sporting Event Contracts to college students and people under the age of 21 – the legal age in the vast majority of states where sports gambling is permitted."