Utah has taken legal action against Kalshi, a prediction market operator, along with its affiliates and two trading firms associated with Susquehanna, alleging that they are operating an illegal gambling business within the state. Attorney General Derek Brown announced the lawsuit during a press conference on Tuesday, stating that the action comes after the state's failed federal challenge against Kalshi, which had previously been dismissed by a federal judge and the Tenth Circuit.
The lawsuit claims that Kalshi has generated between $30.6 million and $61.2 million in fees from Utah accounts. The complaint was filed in Utah's Third District Court and accuses Kalshi’s operations of being a public nuisance, asserting that it inflicts "significant and substantial ongoing harm" on many residents. While Brown could not discuss details of ongoing or potential criminal investigations, he highlighted the intent of the lawsuit to enforce Utah's laws against gambling, which have been in place since its statehood in 1896.
As part of the lawsuit, the state seeks a court order to halt all contracts relating to sports, elections, politics, and culture that Kalshi operates in Utah. Additionally, the state is pursuing restitution of nearly $60 million and demands that the defendants turn over any profits made from Utah customers.
This legal confrontation follows a previous case initiated by Kalshi in February, where the company argued that the Commodity Exchange Act should give the Commodity Futures Trading Commission (CFTC) exclusive jurisdiction over their contracts. U.S. District Judge Robert Shelby ruled against Kalshi, granting Utah a summary judgment and affirming the state’s right to enforce its gambling laws.
During the announcement, Brown remarked, "The bets kept on coming. Kalshi bet that Utah would not enforce its gambling laws. Kalshi now lost their bet," while also cautioning other companies to adhere to Utah’s laws.
This lawsuit uniquely marks the first time a market maker, specifically Susquehanna, has been named as a defendant alongside a prediction market. Susquehanna describes itself as a global quantitative trading firm, providing liquidity to Kalshi as its primary market maker since establishing their relationship two years ago.
Brown emphasized the negative societal impacts of gambling, framing the lawsuit as an effort to protect Utah families. He stated, "Utah has said no to gambling since statehood in 1896, and that didn’t change when betting moved onto cell phones. These companies are not your friends; they are engineered to do one thing: empty your wallet."
The Utah Constitution prohibits any form of gambling or games of chance. This lawsuit comes amid a broader legal debate regarding the jurisdiction of sports-event contracts, with significant cases being reviewed by appellate courts, including the U.S. Supreme Court. Kalshi is expected to respond to the allegations by November 9, while the CFTC has also taken steps to clarify its regulations regarding gambling-related products.
