Florida Class Action Lawsuit Filed Against Crypto.com Alleging Illegal Sports Betting

A federal class-action lawsuit has been filed against Crypto.com in Miami by two California investors. The lawsuit alleges that Crypto.com operates an illegal sports betting platform disguised as a federally regulated derivatives product.

After Crypto.com launched its Sports Events Contracts on its platform in 2024, the plaintiffs, Kamana Keohohou of Palm Springs and Nicolas Evans of Benicia, California, alleged that users across the US have lost hundreds of millions of dollars through the feature. 

They claim that the feature, which is regulated by the Commodity Futures Trading Commission (CFTC), is essentially sports betting, which is regulated by individual states. Despite the company's claims that it is a financial derivatives product. 

Currently, there is a legal grey area surrounding crypto platforms that offer event contracts, due to their resemblance to traditional sports betting. The outcome of the case could indicate how courts view prediction market apps going forward. 

In early last year, the CFTC asked Crypto.com to pause trading on its site for 90 days, after it said it was reviewing two of the platform's self-certified markets. 

Following that, the California Attorney General issued an opinion on daily fantasy sports, stating that, under state law, it is unlawful wagering. 

Prediction markets reports $1 Billion trading volume for Super Bowl LX

The lawsuit follows a different prediction market that recorded over $1 billion in trading volume during this year's Super Bowl. Kalshi's Chief Executive Officer, Tarek Mansour, said in an interview that the increase was 2,700% from the previous year. 

Kalshi offers contracts similar to those on Crypto.com, covering politics, pop culture, financial markets, and sports events. Mansour said during the interview that it had been an incredible weekend for the platform. 

“Kalshi was the biggest brand of the Super Bowl this year, without running a Super Bowl ad, and the way we achieved that is the product,” he said. 

Despite its success, it didn’t come without issues on the big day, after the platform's co-founder, Luana Lopes Lara, announced on social media that payouts had been delayed due to the high volume of users during the game. 

The platform didn’t just offer contracts based on the game's outcomes. Contracts regarding half-time performer Bad Bunny’s opening song saw over $100 million in volume, with an additional $45 million volume generated regarding which other guests would appear alongside the performer. 

Kalshi has also faced scrutiny due to its growth, along with other prediction markets, amid concerns about potential insider-trading risks posed by the contracts. 

However, prior to the Super Bowl, Kalshi announced that it had added measures to expand its surveillance capabilities and enforcement efforts, and had conducted over 200 investigations in the past year, including freezing relevant accounts.