Kalshi’s cease and desist is aimed at a surveillance campaign

Kalshi formally demanded the removal of an ad campaign by a watchdog accusing the company of operating as a sportsbook while posing as a federally regulated financial exchange.

A cease-and-desist letter sent May 20 to the operators of KalshiLies.com alleged that the watchdog group FairPredicts published « false, misleading, defamatory and commercially disparaging statements » about Kalshi and its affiliates. The letter was signed by Kalshi’s general counsel Richard Hayslip and lawyer Maria Vouteraku.

Earlier this week, FairPredicts launched an advertising push in Washington, D.C., aimed at the prediction market industry. The non-profit organization describes itself as a « non-partisan watchdog of market integrity » focused on regulation, transparency and consumer protection related to event-based trading platforms.

An ad circulating on public transport and mobile billboards asked: « If Kalshi is not the house, why do they win when you lose? »

FairPredicts claims that Kalshi Trading LLC, an affiliated market-making firm, profits when clients lose money and effectively acts as the « house » inside the exchange. Journalist Miranda Nazzaro reported that the campaign included a six-figure ad buy timed to coincide with Congress’s growing focus on prediction markets.

Kalshi rejected these accusations in unusually strong terms. The company said its related trading operation represents « less than 1% of the platform’s total sports trading volume » and « does not systematically participate in every trade ». The letter also states that Kalshi operates « with negative wins and losses » instead of generating sports betting-style profits from user losses.

Kalshi issued a cease and desist against a guard after the campaign

Kalshi continues to battle several states that argue that sporting event contracts resemble unlicensed gambling products rather than federally protected financial instruments. This week, the company is suing Rhode Island regulators.

Lawmakers have also stepped up issues surrounding insider trading and market integrity. A recent Senate hearing looking into the sports betting and prediction markets explored concerns about access by young people, the risks of manipulation and whether event contracts blur the line between investing and gambling.

Kalshi recently tightened restrictions that prevent politicians, campaign workers, athletes and league officials from trading certain contracts related to events where they might possess non-public information.

Federal prosecutors also filed what is believed to be the first criminal insider trading case involving prediction markets. A US soldier accused of using classified information to place bets on Polymarket recently pleaded not guilty, adding new attention to the regulatory loopholes surrounding the industry.

FairPredicts continues to accuse Kalshi of lax anti-money laundering safeguards, misleading advertising and conflicts between retailers and related liquidity providers. Kalshi’s legal notice warns that the campaign could expose organizers to defamation, unfair competition and tort claims, while requiring the preservation of communications, funding records and analytics data.

Featured Image: FairPredicts.com