Utah's Attorney General has taken legal action against Kalshi and two trading firms affiliated with Susquehanna, alleging violations of state gambling regulations. The formal complaint was filed in the Third District Court of Utah on October 20, seeking up to $61.2 million in damages along with additional monetary and injunctive relief.
The legal filing seeks to bar Kalshi from trading event contracts related to sports and politics within Utah and demands the return of profits earned from these allegedly illegal activities. According to court documents, Kalshi facilitated around $3 billion in trades from Utah users, resulting in estimated fees ranging from $30.6 million to $61.2 million for the company.
Kalshi disputes Utah's claims, asserting that it operates under a license from the Commodity Futures Trading Commission (CFTC) and does not classify itself as a gambling operation. A spokesperson for Kalshi explained that the company is regulated by the CFTC and that trades on its platform occur exclusively between clients, with prices determined during these transactions.
The central issue in this legal challenge is whether states have the authority to enforce their gambling laws on event contracts from federally regulated prediction markets. This complaint follows an August ruling by US District Judge Robert J. Shelby, which sided with Utah in its contention against Kalshi. The judge determined that the Commodity Exchange Act (CEA) does not restrict Utah from enforcing its own gambling regulations concerning Kalshi's sports event contracts. This ruling posed a significant challenge to Kalshi's position that federal regulation protects its offerings from state gambling enforcement.
