Kalshi Gambling-Loss Suit Dismissed, Refiled in Illinois

A federal judge in Illinois dismissed a third-party suit seeking triple damages for other people's gambling losses on Kalshi, then wrote out what such a claim has to plead to survive: the amount lost, the date it was lost, and the state the loser was sitting in. A rewritten complaint is now live, Kalshi has moved to dismiss that one too, and on September 16 the plaintiff asked the court to freeze the case.

The case is Lavery v. Kalshi Inc., No. 1:25-cv-14184 in the Northern District of Illinois, before Judge Matthew F. Kennelly. It has never been reported here. We pulled the docket and three of its documents off the federal mirror this morning and read them in full, which is how we check everything we publish.

It matters to a sweepstakes player for a specific reason. One of the statutes it runs on, Kentucky's KRS 372.040, is the provision the Kentucky Attorney General expressly invokes against the operator of Chumba Casino, suing in his own words "as 'any other person'" under that subsection, and it is the provision a professional claimant used against Zula Casino's operator and lost on. That route has already hit one wall. This opinion describes a second one.

What is a loss-recovery statute, and who gets to use it?

Several states carry statutes descended from an eighteenth-century English law that let a stranger sue a gambling winner for money somebody else lost, if the loser does not sue first. The plaintiff here did not place any of the wagers. He sues as that third person.

The July 13 opinion sets out the four versions the original complaint used, and the thresholds are not the same.

The amended complaint dropped Ohio and added Georgia under O.C.G.A. § 13-8-3, where a successful claim is payable "for the joint use of Plaintiff and the educational fund of the county".

Why did the first version fail?

Two separate reasons, and the court reached both.

On personal jurisdiction, the judge held that the plaintiff had shown only that Kalshi's platform was available in Illinois, not that any transaction happened there. Quoting the Seventh Circuit, the opinion says "merely operating a website, even a highly interactive website, that is accessible from, but does not target, the forum state is not enough to sustain jurisdiction". Written testimony that Kalshi gave to an Illinois Senate subcommittee on gaming in April 2026 did not help, because it contained no evidence of transactions with Illinois residents and was "unrelated to the betting or trading that gives rise to Lavery's claim". The motion for jurisdictional discovery was denied on the same reasoning.

On the merits the court went further, and this is the part that travels. The statutes do not apply outside their own states, and the complaint never alleged that any named loser was located in Illinois, Ohio, Kentucky or Massachusetts when the losing trade was placed. Nor did it give amounts or dates. Without the amount, the court wrote, there is no way to check that Illinois' $50 floor or Kentucky's $5 floor is met; without the date, no way to check that the third-party waiting period has run. Allegations that unnamed users lost unstated sums on unknown dates were "legal conclusions" and "threadbare recitals".

The court dismissed the complaint and gave the plaintiff until July 27 to move to amend or face judgment.

What does the rewritten complaint do differently?

Filed on August 6, 2026, it answers the opinion point by point. It splits the defendants into four entities and assigns each a role: the exchange that lists the wagers and takes the fees, a proprietary trading affiliate alleged to take the opposite side, a clearing entity, and the parent. It states the theory in one line: "Kalshi calls its venue an exchange and calls the wagers it lists 'event contracts.' Those labels describe how Kalshi wishes to be regulated. They do not describe what happens on the platform."

Each count now names individual participants and says they were "physically located" in the relevant state, the fact the first version was missing. The Georgia count goes furthest and pleads a figure, "approximately $350 to $400 that was lost during calendar year 2025". We are not reprinting the participants' names: they are private individuals who are not parties, and naming them adds nothing a reader needs.

Kalshi moved to dismiss again on August 31, under Rule 12(b)(6) and for lack of pendent personal jurisdiction. None of these allegations has been tested, and a motion to dismiss decides only whether a complaint may proceed, not whether it is true.

Why did the plaintiff ask to stop his own case?

Because the preemption question sitting under it is in motion above him. In the seven-page motion filed on September 16, he asks for a stay until December 31, 2026, pointing to the Wisconsin judge who certified the same question for a Seventh Circuit appeal on September 11 and to New Jersey's petition to the Supreme Court, docketed as No. 26-299. His argument is that Kalshi asked for and got exactly this in another case in the same circuit four days earlier.

The timing explains the urgency. When the judge let the case be amended on August 3 he set the schedule in the same minute entry: the response to the motion to dismiss is due September 21, with a reply due October 5. The stay motion went in five days before that first deadline, and asks in the alternative for 14 more days if the stay is refused.

The motion records that the defendants oppose the stay but do not oppose that 14-day extension. That is the movant's account of a conference between counsel; Kalshi has not filed its own response as the docket stood this morning, entry 42 is the last one on it, and nothing has been decided.

What happens next in the Kalshi Illinois case?

Every date the court has set or the parties have filed, in order.

Nothing after September 16 has happened yet, and the stay motion asks the court to move the last two rows or cancel them.

What does this mean for sweepstakes players?

No sweepstakes operator is a party and nothing here changes what you can do today. It is worth reading anyway, because the private route to clawing back sweepstakes losses runs on these same statutes, and it has now met two different obstacles in two different courts.

The first was standing. In Kentucky, a suit over Zula Casino losses was dismissed on August 18 because the company bringing it had never lost a cent and could name no gambler who had. That was a professional claimant, one of a set of similarly named LLCs. It is not one of the thirteen statewide class actions filed against sweepstakes-linked defendants in the Western District of Kentucky on July 20 and 21, which are brought by named individuals and whose complaints are still not in the public mirror, so we cannot tell you which subsection those thirteen invoke.

The second is pleading. Even a plaintiff who names a real loser, as this one now does, still has to plead the amount, the date and the state the person was sitting in. For a sweepstakes operator the geography element cuts both ways, because these platforms do block states, as our state-by-state legality map tracks, and do record where players are. What this opinion does not do is decide whether any of it is gambling. That question is untouched here and in the Kentucky cases.

There is one practical thing to take from it. If you ever expect to bring a loss-recovery claim of your own, these are the three facts this judge said a complaint cannot skip, and the record of your own that each one comes from.

1. The amount lost. A deposit receipt or a purchase record.
2. The date it was lost. A dated transaction history.
3. The state you were physically in when you lost it. The address on your verified account.

No third-party claimant can assemble those three for you, which is the same conclusion we reached from the Kentucky ruling in August.

Sources & documents

• Docket in Lavery v. Kalshi Inc., No. 1:25-cv-14184 (N.D. Ill.) - the full entry list, read September 17, 2026
• Memorandum Opinion and Order, entry 37, July 13, 2026 - 14 pages; the dismissal, the statutory thresholds table above and every quotation about pleading
• First Amended Complaint, entry 40, August 6, 2026 - 28 pages; the four counts and the Georgia figure
• Plaintiff's motion to stay, entry 42, September 16, 2026 - 7 pages; the stay request and the account of counsel's conference

21+ only. Nothing above is legal advice, and no court has ruled on whether any sweepstakes casino is lawful in your state. If gambling stops being fun, call 1-800-GAMBLER or read our responsible gaming resources.