@harlan4096 perhaps you can help us get some clarity here, but the KSN Network Statement and the UI seem to both state that if you opt out of the KSN, you lose cloud protection. However, Kaspersky's website says something different:
Trying to spot check, leaving the KSN seems to still get me UDS cloud detections when I click through on zero-days. I still see a bit of outbound communication when I trigger a manual scan. However, the "Check reputation in KSN" context menu option gets greyed out.
Above all of this, I do not see another privacy policy that covers the fact that with KSN disabled, KTS is still querying hashes of executables against the KSN cloud.
Maybe they tried to implement the home user opt out clause. I am in support of this behavior for home users (you can opt out of sample submission but still get read only protection from the cloud)..... HOWEVER, the implementation of this looks so conflicted and half-polished it's not inspiring confidence.