Current Month (April 2026)
Consumer Finance Law
A Case to Watch: Song Dow Lee Challenges Authorization Defense
By Nicholas Vera, Pilgrim Christakis LLP
A lawsuit filed in the Central District of California earlier this year may signal a shift in how courts view bank liability for a particular form of financial fraud. In Song Dow Lee v. HSBC Bank USA, N.A., No. 2:26-cv-01198 (C.D. Cal. filed Feb. 5, 2026), an elderly customer alleges that he lost more than $8 million to “pig butchering” schemes—a type of fraud that takes its name from the practice of “fattening” victims with false trust before draining their finances. Specifically, the plaintiff alleges that he was approached online by someone posing as a successful investor who, over time, gained his trust before steering him toward a fabricated overseas investment opportunity. Plaintiff alleges that HSBC is liable because it processed the transactions at issue despite red flags, including escalating transfer amounts, foreign recipients, and inconsistencies with prior banking activity. On these allegations, the complaint asserts claims of negligence, breach of fiduciary duty, and violations of California’s elder financial abuse statutes.
The case challenges the longstanding notion that a consumer’s authorization insulates financial institutions from liability for fraud-induced transactions—a principle reflected in consumer protection laws such as the Electronic Fund Transfer Act (“EFTA”) and Regulation E, which extend protections only to unauthorized transfers. Song Dow Lee will test whether that principle holds when a bank repeatedly processes transactions bearing signs of social engineering fraud. The case is one to watch: the outcome may clarify whether courts will expect more active intervention when vulnerable customers are at risk and could prompt regulators to consider recourse for transactions that, while authorized, are procured through fraud.
Gaming and Sports Law
Arizona Says You Can’t Bet on Everything: Kalshi Charged with Illegal Betting
By Ashley Fortner, South Texas College of Law, Houston
In late March, the State of Arizona filed criminal charges against Kalshi, a regulated prediction market exchange that offers its registered customers the ability to “trade on anything,” including weather, sports, economic data, and elections. Kalshi’s website explains that it is not sports betting because it allows all parties in a transaction to operate trades, similar to a stock market. Kalshi notes that it is regulated by the Commodity Future Trading Commission (“CFTC”).
Arizona[1] charged Kalshi with sixteen misdemeanor counts of illegal betting and wagering on the result of races, sporting events, contests or other games of skill or chance, or any unknown future event. Arizona alleges that Kalshi accepted wagers related to whether the Oklahoma City Thunder basketball team would win by over 14.5 points in its February 12, 2026, game, and accepted a parlay or combo bet on the number of points scored and the performance of specific players in the Phoenix Suns vs. Indiana Pacers game, among other bets.
The state also charged Kalshi with four misdemeanor counts of election wagering for wagering on the results of various state elections. Arizona alleged Kalshi accepted bets on events including whether a Democratic candidate would win the 2026 election for secretary of state of Arizona, whether Andy Biggs would win the 2026 Republican Party primary election for governor nominee in the State of Arizona, and whether a Republican candidate would win the 2026 election for governor of Arizona. But these out-of-the-ordinary alleged wagers are what make Kalshi so popular.
Kalshi has been proactive in its litigation against state gaming regulators by seeking declaratory judgments and preliminary injunctions that would conclude Kalshi’s model is legal. Its argument is that the CFTC has exclusive federal jurisdiction over transactions on designated contracts markets under the Commodity Exchange Act (“CEA”), not individual states’ gaming regulators. Therefore, federal law preempts any attempted state regulations. Kalshi has had some success in successful in obtaining their early injunctions—but it has not been long-lasting.
For example, Kalshi received a temporary injunction in April 2025 in Nevada.[2] In granting the preliminary injunction, the District Court concluded that preemption was likely and barred state regulators from any immediate enforcement actions. However, the Court dissolved the preliminary injunction in December 2025, reasoning that “event contracts that turn on the outcomes of sporting events are not swaps and thus do not fall within the CFTC’s exclusive jurisdiction.”[3] Kalshi has appealed to the Ninth Circuit.[4]
While the Nevada action is pending before the Ninth Circuit, the Third Circuit affirmed Kalshi’s preliminary injunction enjoining New Jersey from enforcing state law against Kalshi’s sports-related events contracts, reasoning that the CEA preempts state law.[5] Similar actions are being litigated in Tennessee[6] and Ohio.[7] Maryland[8] and Massachusetts[9] have ruled in favor of state jurisdiction over Kalshi’s sports events contracts.
Stay tuned for updates on Kalshi’s strategy against these criminal allegations.
Mayes v. KalshiEX, LLC, No. CR2026-000173-001, CR2026-00173-002 (Ariz. Super. Ct. Maricopa Cnty. filed Mar. 16, 2026). ↑
KalshiEX, LLC v. Hendrick, No. 2:25-cv-00575 (D. Nev. Apr. 9, 2025). ↑
KalshiEX, LLC v. Hendrick, No. 2:25-cv-00575 (D. Nev. Nov. 24, 2025). ↑
KalshiEX, LLC v. Hendrick, No. 25-7516, 2026 LX 73158 (9th Cir. filed Nov. 28, 2025). ↑
KalshiEX, LLC v. Flaherty, No. 25-1922, 2026 LX 136350 (3rd Cir. Apr. 6, 2026). ↑
KalshiEX, LLC v. Orgel, No. 3:26-cv-00034, 2026 LX 98200 (M.D. Tenn. filed Jan. 9, 2026). ↑
KalshiEX, LLC v. Schuler, No. 2:25-cv-1165, 2026 LX 172964 (S.D. Ohio filed Oct. 7, 2026). ↑
KalshiEX, LLC v. Martin, 793 F. Supp 3d 667 (D. Md. 2025). ↑
Commonwealth v. KalshiEX, LLC, No. 2584CV02525, 2026 LX 33147 (Mass. Super. Ct. Jan. 20, 2026). ↑
