Man who lost $308,000 on sports bets sues Kalshi for offering illegal gambling

Lawsuit demands Kalshi return losses because online betting is illegal in Washington.

A man who lost over $308,000 making sports wagers on Kalshi is suing the prediction market for violating the state of Washington’s ban on online gambling. He’s trying to turn those losses into an overall victory with a lawsuit seeking a payment of over $580,000.

Bellevue, Washington, resident Scott Bright’s “wagering occurred at a time when it was unlawful in Washington and when the Washington Attorney General had already sued KalshiEX LLC in this Court alleging precisely that,” said the gambler’s lawsuit filed on September 24 in King County Superior Court. Kalshi has since filed a motion to dismiss the lawsuit.

While state attorneys general throughout the US are trying to shut down Kalshi for allegedly violating state gambling laws, Bright’s case tests whether unsuccessful gamblers can obtain restitution from the company through individual lawsuits.

“Washington has prohibited Internet gambling since 2006. Washington has also provided, since long before that, a statutory cause of action permitting any person who loses money at illegal gambling to recover it from the proprietor for whose benefit the game was conducted,” Bright’s lawsuit said.

Even if Bright’s lawsuit fails, gamblers who lost on Kalshi could get money back through the lawsuits filed by state governments. For example, Washington’s lawsuit against the company said the attorney general “is entitled to recover all money Washingtonians have lost through Defendant Kalshi’s illegal gambling operation” under the state’s Recovery of Money Lost at Gambling Act. Washington already won a court order restricting the kinds of wagers Kalshi can offer in the state, but it took effect after Bright’s losses.

Kalshi says event contracts aren’t gambling

Kalshi wants Bright’s lawsuit to be moved to US District Court for the Western District of Washington, saying it must be tried in a federal court instead of a state one. In an October 30 motion to dismiss Bright’s case, Kalshi argued that he did not lose any money on “gambling.” Kalshi said he lost money on “event contracts,” which Kalshi says can only be regulated by the federal government.

“The contracts which Plaintiff mischaracterizes as gambling are event contracts offered on the Platform subject to the CEA [Commodity Exchange Act], in conformance with the rules and regulations of the CFTC [Commodity Futures Trading Commission], the federal agency which has statutory authority to oversee the CEA,” Kalshi said.

We contacted Bright’s attorney, Michael Daudt, about Kalshi’s court filings and will update this article if we get a response.

“Plaintiff alleges that his activity on the platform was gambling and that he ‘lost,’” Kalshi wrote. “He does not allege that anyone misled him about how the platform worked, what it charged, or the risk that any position might lose. Yet, he now sues KalshiEX and its parent, Kalshi Inc., to recover nearly double his own alleged net realized loss under Washington’s gambling loss-recovery statute, and a theory of unjust enrichment.”

Between June 17 and August 14, 2026, Bright transferred $315,353.94 to Kalshi in 253 separate debits from his checking account, his lawsuit said. Kalshi allegedly collected $5,589.05 in funding fees on those transfers.

Bright made numerous wagers on sporting events including professional baseball games and tennis matches. He apparently put any winnings into new bets, and alleges that “Kalshi’s platform cycled Plaintiff’s deposits through $14,396,457.30 in transactions and assessed and retained $84,062.71 in trading fees on them, equal to 26.7 percent of everything Plaintiff deposited.”

After all his bets, Bright suffered a net loss of $308,781.62, and his account was left with a balance of $983.27. Kalshi said that Bright’s “alleged losses went to counterparties rather than” to Kalshi itself and that Bright’s “positions were matched with counterparties and resolved according to the outcomes of the underlying events.”

“The Complaint does not allege that KalshiEX or Kalshi Inc. was the counterparty to any of Plaintiff’s positions,” Kalshi said.

Kalshi calls itself “a neutral exchange platform” with no financial stake in the outcome of any event. It makes revenue by collecting fees on transactions. But while Kalshi describes itself as a neutral operator and collector of transaction fees, its business model also includes a trading affiliate that places wagers on the platform.

Kalshi’s trading affiliate

Kalshi’s rulebook says its trading affiliate “participates on the Platform and provides liquidity to the Platform by placing orders on either (or both) sides of a market at competitive price levels.” Kalshi says its affiliate only has access to the same public information that other traders on the platform have.

Bright’s lawsuit alleges that Kalshi’s affiliate “took the opposite side of a substantial portion of Plaintiff’s positions,” meaning that “Kalshi and the enterprise under common ownership with it were not a neutral venue but the dealer or player winning within the meaning of [state law], in addition to being the proprietor for whose benefit the wagering was conducted.”

Bright doesn’t know for sure whether Kalshi’s affiliate was on the other side of any of his bets. “The identity of the participant on the opposite side of each of Plaintiff’s positions, and the profit each such participant realized, is information exclusively within Kalshi’s possession,” Bright’s lawsuit said.

The US Court of Appeals for the Ninth Circuit ruled in August that Nevada can regulate Kalshi under gambling laws. Although that case involved Nevada, the Ninth Circuit’s jurisdiction includes the state of Washington. Bright’s lawsuit quoted the ruling’s finding that “placing sports bets, even when called by another name, is still gambling.”

Although Bright’s lawsuit said his net loss was $308,781.62, he asked for $580,544.98 based on an “event-by-event” calculation derived from a 1950 ruling issued by the Washington Supreme Court. “Computed on the event-by-event basis required by Heitfeld, under which winnings in separate and distinct events may not be offset against losses, the sums Plaintiff lost total $580,544.98,” the lawsuit said.

Bright’s lawsuit said that if the court declines to order $580,544.98 in restitution, it should instead award “all funds Plaintiff transferred to Kalshi and the $89,651.76 in funding and trading fees Kalshi collected.” That would amount to over $405,000.

Kalshi seeks delay until Supreme Court weighs in

In addition to its motion to dismiss the case, Kalshi filed a motion to stay the proceedings at least until the US Supreme Court decides whether to take up a separate case on whether state gambling laws apply to prediction markets. “The orderly course of justice favors a stay because Supreme Court review will settle or simplify every claim and ensure uniform treatment of like suits,” Kalshi told the US district court.

Kalshi has suffered some notable losses in US appeals courts, which found that states can regulate the platform’s event contracts under gambling laws. But federal courts have not unanimously sided with states, and New Jersey asked the Supreme Court to settle the question of whether states can regulate Kalshi under gambling laws.

Kalshi’s motion for a stay in the Bright case noted that Washington government officials are “pursuing overlapping claims” against Kalshi. “The State of Washington is pursuing the same theory, and seeks the same recovery for Mr. Bright, in a case pending before the Superior Court of Washington for King County,” Kalshi wrote.

Kalshi tried to get the state’s case moved to a federal court, but it was sent back to King County Superior Court in May. Washington won a preliminary injunction against Kalshi in August, when a King County judge ordered Kalshi to implement geofencing and stop allowing many types of wagers in the state.

The county court’s order required Kalshi to stop offering or accepting event contracts “related to sports, elections, politics, entertainment, culture, tech and science, or mentions” in the state. The injunction did not affect wagers in the commodities, climate, economics, and finance categories.

Bright transferred his funds to Kalshi before the geofencing order took effect. His lawsuit claims that on September 15, he tried to access the app but received a notice that “using this app in your current location is prohibited.”

This article was updated to correct the date the lawsuit was filed.