Kalshi is under investigation over its influencer marketing strategy and questions whether the firm can describe itself as a peer-to-peer exchange with ‘no house’.
Kalshi’s conflict with New York state legislators continues to compound as the prediction markets platform faces an investigation of its marketing practices to engage audiences.
New York attorney general Letitia James has demanded the state court to enforce an investigative subpoena issued on 25 September, alleging Kalshi failed to comply with the submission of its marketing records.
James claimed the firm has specifically ignored to co-operate with an “ongoing civil investigation into potential fraud and deceptive conduct by Kalshi and other third-parties in the prediction market industry”.
James requested an order requiring Kalshi to produce documents within 10 days, along with a penalty against the company.
As reported by SBC Americas, Affiliate Leaders’ sister title, the investigation places influencer relationships at the centre of New York’s latest challenge, examining how paid promotions present the financial opportunities and risks of trading event contracts.
Investigators are scrutinising content featuring large wins, including claims that Kalshi earnings covered rent or replaced a salary. The petition also raised concerns about creators allegedly failing to disclose their sponsorship arrangements.
The requested records extend to payments made to promoters, trades they placed on the platform and the instructions provided to those advertising Kalshi.
These demands could establish how closely Kalshi directed promotional content and what commercial relationships sat behind testimonials presented to consumers.
The investigation also challenges another central marketing message: whether Kalshi can describe itself as a peer-to-peer exchange with “no house”, while its affiliated business, Kalshi Trading, participates in market making.
James is seeking records covering proprietary trading, external liquidity providers and incentive programmes. The inquiry therefore reaches beyond advertising disclosures to examine whether consumers received an accurate account of who could be taking the other side of their trades.
Mounting scrutiny over business practices
The marketing investigation adds to potentially substantial liabilities arising from New York’s separate illegal gambling lawsuit.
Filed in July, that action alleges Kalshi operated an unlicensed gambling business and exposed customers, including people below New York’s legal gambling age of 21, to financial harm.
New York seeks the forfeiture of alleged illegal gains, restitution for affected consumers and fines equal to three times the company’s gains. Court filings put the reported claim at around $36bn, pending an accounting analysis, rather than an established liability or compensation award.
The New York State Gaming Commission is pursuing its own subpoena enforcement proceedings, with a hearing scheduled for 14 December. Its requests cover sports contracts, younger users, wagering-style advertising and corporate ownership.
The mounting scrutiny comes as Kalshi continued to promote its expansion beyond sports betting throughout October (last month).
On 6 October, the company reported record growth in election markets, claiming election trading volume had surpassed its 2024 presidential election year levels. It also introduced transparency features intended to help audiences interpret prices and assess political forecasts.
A further development came on 26 October through a partnership with S&P Dow Jones Indices, covering event contracts linked to established financial benchmarks and the development of new indices using Kalshi’s market data.
The collaboration offers indices tracking expectations across economics, politics and sport, broadening the potential commercial applications of event contracts.
“Kalshi’s aspiration is to be the next great financial exchange,” said Tarek Mansour, chief executive and co-founder.
Mansour’s strategy presents Kalshi as a platform with utility beyond gambling. The company argues that indices combining event contracts could eventually help businesses and investors monitor and hedge risks associated with weather, supply chains and political change.
New Jersey has asked the US Supreme Court to review the issue following conflicting appellate decisions. The court has not yet agreed to hear the case, leaving Kalshi’s expansion exposed to continuing legal challenges over the boundaries between financial trading and state-regulated gambling.
Kalshi ambitions remain subject to a nationwide jurisdictional dispute over whether federal commodities regulation prevents states from applying their gambling laws to sports event contracts.
