Summary
The FlightAware lawsuit against Kalshi adds a new front to the legal challenges facing prediction markets, testing whether platforms may rely on third-party data and branding to settle contracts without a commercial agreement. This is distinct from the state gambling suits — it raises questions of data licensing, trademark infringement and consumer safety.
Key Points
- The lawsuit: FlightAware, which operates the world's largest flight-tracking platform, filed suit in the US District Court for the Southern District of New York against Kalshi, alleging unauthorized commercial use of its flight data and trademark to run bets on airline cancellations. It seeks damages and an injunction against further use of its data and logo.
- The product: Kalshi started offering bets on nationwide and local flight cancellations on July 14, the same day it submitted its regulatory filing to the CFTC to list such event contracts. The contracts let users bet on the percentage of scheduled flights canceled during a specific period.
- The licensing claim: FlightAware alleges Kalshi had agreed to terms barring commercial use of its data, including through a fee-based AeroApi account that a Kalshi employee registered for in 2022.
- The fair-use defense: Kalshi responded to FlightAware's cease-and-desist letter, denying "it violated FlightAware's license or infringed the FlightAware mark and asserted that its references to FlightAware constituted nominative fair use."
- The disclaimer dispute: FlightAware said Kalshi added a disclaimer on its website stating the markets were not endorsed by FlightAware. However, FlightAware argues the disclaimer does not solve anything because Kalshi continued to claim its data would still determine winners and losers.
- The safety argument: FlightAware said it believes betting on flight cancellations creates safety risks by giving participants a financial incentive to influence whether flights are delayed or canceled. Kalshi has identified US Department of Transportation flight data as an alternative source for settling the contracts.
- The state gambling context: New York sued Kalshi at the end of last month, alleging it offers sports and event wagers without a gaming license. The platform and other prediction-market firms face similar lawsuits in at least two other states — Wisconsin and Nevada.
- The significance: FlightAware's case is different from the state gambling suits as it tests whether a prediction market may use a third party's data and trademark to settle contracts without a commercial agreement. The outcome could set a precedent for how prediction markets source and settle the data underlying their event contracts — a critical dependency for an industry that has seen surging popularity and revenue (Kalshi's parent and rival platforms have reported record volumes).