A massive federal class action lawsuit has been filed in Miami against cryptocurrency giant Crypto.com, accusing the platform of operating an unlicensed nationwide sports betting ring. The complaint, filed on February 16, 2026, alleges that the company's popular "Sports Event Trading" feature violates gambling laws in over two dozen states. Plaintiffs claim the exchange is masking illegal bookmaking as regulated financial derivatives, exposing millions of American users to unregulated wagering risks.
The Core Allegations: Illegal Sports Betting Operation
Two California investors, Kamana Keohohou and Nicholas Evans, are leading the charge in the U.S. District Court for the Southern District of Florida. They contend that Crypto.com and its subsidiary, Foris DAX Inc., have misled users by marketing traditional sports wagers as CFTC-regulated financial products. The lawsuit seeks to recover alleged losses amounting to "hundreds of millions of dollars" for users across the country.
According to court documents, the plaintiffs argue that the Sports Event Trading feature functions identically to a sportsbook. Users purchase binary "yes/no" contracts on sporting outcomes—such as whether the Kansas City Chiefs will win a game—rather than trading on financial metrics. The complaint asserts that this mechanism bypasses the consumer protections mandated by state gambling regulators, effectively running an illegal sports betting operation under the guise of innovation.
Inside the 'Sports Event Trading' Feature
Launched in December 2024, Crypto.com's sports trading product allows users to buy event contracts wagering positions. These contracts pay out a fixed amount if a specific outcome occurs and expire worthless if it does not. While Crypto.com promotes these as federally regulated derivatives under its acquisition of the North American Derivatives Exchange (NADEX), the lawsuit claims this is a legal smokescreen.
The plaintiffs point to the specific mechanics of the trade: the value of the contract is entirely dependent on the result of a sporting match, not an economic indicator. Legal experts note that this distinction is critical. If a contract relies solely on a game's score, it typically falls under state gaming jurisdiction rather than federal commodities law.
Regulatory Gray Areas and Previous Legal Battles
This lawsuit is not the first time Crypto.com has faced scrutiny over crypto gambling regulation. In late 2025, a federal judge in Nevada ruled against the company, forcing it to halt sports prediction markets in the state. Judge Andrew P. Gordon determined that these specific contracts did not qualify as "swaps" under the Commodity Exchange Act because they depended on the outcome of an event (who wins) rather than the occurrence of an event (whether the game happens).
That ruling set a dangerous precedent for the exchange. The new Miami lawsuit leverages that decision, arguing that if the products are not valid federal swaps, they are by default unregistered gambling contracts. This creates a significant liability for Crypto.com in states like California and Florida, where sports betting remains heavily restricted or requires specific tribal compacts.
Impact on Sports Betting Laws 2026
The outcome of this federal class action lawsuit could reshape the landscape of sports betting laws 2026. If the court sides with the plaintiffs, it could force a massive rollback of "prediction market" products offered by crypto exchanges. It challenges the industry's attempt to use federal preemption to bypass strict state gaming taxes and licensing fees.
Comparison to Prediction Markets
While platforms like Kalshi and Polymarket have navigated similar legal waters, Crypto.com's direct integration of these bets into a retail crypto app broadens the exposure. Critics argue that by gamifying sports trading for retail investors without age verification or problem gambling safeguards comparable to licensed sportsbooks like DraftKings or FanDuel, crypto platforms are creating a black market for sports wagering.
What This Means for Users
For now, the Crypto.com lawsuit highlights the risks inherent in unregulated betting markets. Users participating in these event contracts may have little legal recourse if the platform halts trading or if funds are frozen due to regulatory enforcement. As the case proceeds through the Florida courts, industry analysts expect Crypto.com to mount a vigorous defense based on the Commodity Futures Trading Commission's (CFTC) authority, but the mounting legal pressure suggests the era of "wild west" crypto sports betting may be drawing to a close.
