Kalshi Comes Under New Scrutiny on Gambling Risks as User Relapses

A former sports bettor who self-excluded from regulated gambling sites went on to lose more than $25,000 trading on Kalshi, raising new questions about prediction markets and gambling harm. Self-Excluded Bettor Loses More Than $25K Trading on Kalshi The Pennsylvania man, who uses Thomas as his middle name, first developed a gambling problem via DraftKings and FanDuel during the pandemic. Eventually, his gambling left him owing some $75,000, including more than $50,000 with online sportsbooks. Thomas went bankrupt in 2023 and then signed up for Pennsylvania’s self-exclusion program. The measure barred him from casinos and from licensed online betting services in the state. However, his exclusion did not stop him from joining Kalshi. About two years after his bankruptcy, Thomas found prediction markets through an Instagram ad. The promotion gave users a $20 bonus when they spent $10 on the platform. His first activity started snowballing fast. He eventually lost more than $25,000 on Kalshi and said he was trading up to 18 hours a day at a time, as reported by NPR. His main focus moved to bitcoin-related contracts. Traders in these markets can bet on whether the cryptocurrency will go above or below certain price levels. Some contracts expired in 15 minutes, providing multiple opportunities to enter new positions. Eventually, Thomas got in touch with Kalshi, telling them he had a gambling problem and had already self-excluded from regulated betting services. He asked the company to close his account completely.Kalshi first sent him to tools like trading breaks, voluntary opt-outs, and deposit limits. The company then blocked his account after repeated requests. Kalshi Defends Financial Model Amid Growing Gambling Debate The case highlights the regulatory vacuum surrounding prediction markets. Kalshi is regulated at the federal level, and it is not licensed by any state gambling commissions, so people who have opted into self-exclusion programs in certain states are not automatically barred from using the site. Kalshi stresses that their exchange is fundamentally different than a sportsbook. The company says it matches buyers and sellers, rather than taking the opposite side of customer positions. It also highlights responsible-trading features and partnerships that are aimed at helping users with gambling problems. Critics are unconvinced. Counselors who work with problem gamblers say short-term prediction contracts can encourage repeated betting because a user can immediately move into another market after a loss. The debate has also been fueled by Kalshi’s increased presence in sports. A significant portion of the platform’s activity comes from sports contracts, with cryptocurrency markets forming another large category. At the same time, the company has been trying to disassociate its brand from traditional gambling. As we reported in our June article, Kalshi removed gambling-related descriptions from recent trademark filings and described its products as event contracts. Kalshi also dismissed other research that found retail users lost a combined $500 million on the platform. The company challenged the methodology and said the study wrongly compared its exchange structure with casino-style gambling. The latest case adds another dimension to the debate. Kalshi calls itself a financial marketplace, but regulators, researchers, and gambling experts are still trying to understand how people use its products.