Less than a month after Kalshi announced it would allow users to bet on airline cancellation risk, the company is now facing legal action from a flight-tracking company.
On Monday, FlightAware alleged in a lawsuit that Kalshi built its flight-cancellation betting pages with FlightAware’s data and displayed the company’s name on its site despite requests to stop. The lawsuit also claims that flight-cancellation betting could incentivize bettors to manipulate the odds and potentially disrupt air travel.
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FlightAware’s lawsuit is the latest legal action against Kalshi. In July, New York state sued the company after it alleged Kalshi was running an illegal gambling operation. The state is seeking to ban the company from operating there without a gambling license and force it to return all of its gains. State officials estimate losing that lawsuit could cost Kalshi about $36 billion.
What’s in FlightAware’s lawsuit?
On July 14, Kalshi announced that it would allow users to bet on flight cancellations in the U.S. and at some particular airports. FlightAware’s complaint alleges that Kalshi named FlightAware as the “Primary Source Agency,” used FlightAware’s registered trademark and said that the bets are “verified from FlightAware,” without notifying the company beforehand.
FlightAware said it didn’t know about Kalshi’s alleged misuse until reporters called asking for the company’s comment. The complaint said that there was “widespread outrage and concern” after people learned about Kalshi’s new bets, including some concerns that the bets could “incentivize unsafe tactics to impact cancellations” and potentially harm public safety.
FlightAware’s legal team used previous instances of alleged betting market manipulation to justify their concerns. One instance involved a case in which French authorities said a person tampered with a weather station at Charles de Gaulle Airport in Paris, turning a Polymarket weather bet of less than $120 into more than $21,000.
Lawyers said this reveals that prediction markets not only place a cash value on what will happen but also on the ability to affect the outcome or data used to record it. They said anything, even a temperature sensor, can “all become instruments of a wager.”
“As the prediction-market industry has grown, so has the risk that its financial incentives will distort the events on which customers bet, as well as public concern about that distortion,” the lawyers wrote in the complaint.
Prediction markets explode in popularity
While electronic prediction markets may seem like a relatively new phenomenon, they date back to the 1980s. In 1988, the University of Iowa launched the Iowa Electronic Market, which it used as an academic experiment to test whether small-scale financial trading on political outcomes could better predict future political events than traditional polling.
Flash-forward to today, and predictive betting markets are more popular than ever, with Kalshi reporting millions of active users, according to CNBC. The company’s popularity has even prompted it to create a “Midterms Hub” for the 2026 midterm elections, providing users with data and news on each race in one easy-to-use section.
But some prediction market companies have faced criticism over allegations of insider betting. House Oversight Committee Chairman James Comer, R-Ky., said in May that he was launching an investigation into possible insider trading involving Kalshi and Polymarket.
The investigation followed a Department of Justice case that involved an American soldier accused of using confidential information tied to the operation to seize former Venezuelan President Nicolás Maduro for prediction market bets.
The investigation led to the DOJ charging Gannon Ken Van Dyke with multiple crimes, including the unlawful use of confidential government information for personal gain. The department alleged that Van Dyke bet a total of $33,034 on bets including “U.S. Forces in Venezuela . . . by January 31, 2026” and “Maduro out by . . . January 31, 2026.” The DOJ said Van Dyke won nearly $410,000 on his bets.
Lawmakers have begun looking at ways to better regulate prediction markets against insider trading. In April, the Senate passed a rule banning members and staff from using them to place bets. Lawmakers are now backing legislation to prohibit any federally elected official or government employee from using insider information to make wagers.
In March, Sens. Adam Schiff, D-Calif., and John Curtis, R-Utah, introduced the bipartisan Prediction Markets Are Gambling Act. This bill would prohibit trading platforms regulated by the federal government from presenting casino-style gambling and sports betting as financial products. Lawmakers say this allows prediction markets to avoid regulations that other gambling services are required to follow. Schiff said the Commodity Futures Trading Commission, which oversees financial markets, has greenlit these markets and even promoted their growth.
“It’s time for Congress to step in and eliminate this backdoor which violates state consumer protections, intrudes upon tribal sovereignty, and offers no public revenue,” Schiff said in a statement announcing a House companion legislation.
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