KEY TAKEAWAYS
- Utah sued Kalshi, its affiliates and two Susquehanna trading firms Tuesday, alleging illegal gambling.
- The state estimates Kalshi earned $30.6 million to $61.2 million in fees from Utah accounts.
- The suit follows Kalshi’s failed federal challenge, which a federal judge and the Tenth Circuit rejected.
Utah Attorney General Derek Brown moved from defense to offense against Kalshi on Tuesday, while adding a new defendant not yet targeted elsewhere.
Brown announced during a Tuesday press conference the filing of a civil lawsuit in the state’s Third District Court accusing the prediction market operator of running an illegal gambling business in a state that banned gambling at statehood in 1896.
The complaint names Kalshi, its affiliated entities, and two Susquehanna trading firms that Brown described as market makers on the platform. Brown declared Kalshi’s operations a public nuisance and said the company caused “significant and substantial ongoing harm” to a “significant number” of Utahns. The complaint is civil, and Brown said he cannot comment on current or potential criminal investigations.
The state wants a court order ending Kalshi’s sports, elections, politics, and culture contracts in Utah, enforced through a geolocation provider, along with restitution of up to roughly $60 million. Brown also asked the court to require the defendants to turn over profits they earned from Utah customers.
Timeline of Utah battles with Kalshi
The lawsuit responds to a legal battle Kalshi started. The company sued Utah officials in February, arguing that the Commodity Exchange Act gives the Commodity Futures Trading Commission (CFTC) exclusive jurisdiction over its contracts.
In August, U.S. District Judge Robert Shelby rejected that argument, granted Utah summary judgment, and closed the case. It was the first final merits ruling against Kalshi on preemption. Kalshi appealed, and in September the Tenth Circuit Court of Appeals denied its emergency motion for an injunction pending appeal.
“The bets kept on coming,” Brown said. “Kalshi bet that Utah would not enforce its gambling laws. Kalshi now lost their bet.”
Brown also put the rest of the industry on notice.
“To every other company watching, I would ask you to do one thing: read the complaint,” he said. “We’re asking you to follow Utah law.”
Is Susquehanna in trouble for prediction markets affiliation?mor
Utah’s suit marks the first known instance of a market maker being named as a defendant alongside the prediction market on which it trades.
Susquehanna describes itself as a “global quantitative trading firm powered by scientific rigor, curiosity, and innovation.” It became Kalshi’s primary source of liquidity two years ago when Susquehanna aligned with the company as a major market maker.
“With ~$2 Trillion in yearly volume, SIG is one of the largest market makers on the planet. They now have a dedicated trading division to trade prediction markets on Kalshi. This is the first time in prediction markets history that a prestigious Wall St institution commits to the asset class,” Kalshi CEO Tarek Mansour wrote on LinkedIn to announce the partnership.
“The launch of SIG has the potential to transform prediction markets by making them similar to traditional markets — liquid and dynamic. You can now trade significant volumes, 100,000 shares at a time (up from 1,000) in Kalshi’s major markets.”
Susquehanna deepened that relationship with Kalshi earlier in August, providing liquidity and pricing for Kalshi’s new block trading arrangement with Cantor Fitzgerald.
SBC Americas contacted SIG for comment but did not receive a response before publication.
Why Utah opposes gambling
The Utah Constitution bars the Legislature from authorizing “any game of chance, lottery or gift enterprise under any pretense or for any purpose.” The state has no lottery, casinos, or sportsbooks.
“Utah has said no to gambling since statehood in 1896, and that didn’t change when betting moved onto cell phones,” Brown said.
Brown also framed the lawsuit as protecting the state’s families. He told Utahns the lawsuit targets the companies, not their customers, and urged anyone losing money to stop and get help.
“Utah bans gambling, and we do it because it destroys families,” he said. “These companies, they’re not your friends. They are engineered to do one thing and one thing alone, and that is to empty your wallet.”
D. Todd Christofferson, the leader of the Church of Jesus Christ of Latter-Day Saints, also recently called out prediction markets for their negative impact.
“A third, relatively new platform is what are called ‘prediction markets’ that allow participants to bet on whether something will or will not happen and when. It could be tied to anything: interest rates, elections, sports, wildfires, or even, if you can imagine, the timing of the Second Coming,” Christofferson said.
Why Utah is suing Kalshi
Kalshi calls its products event contracts on a federally regulated exchange. Utah’s complaint argues the contracts are “indistinguishable from the format of bets offered through any sportsbook,” including props, parlays and point spreads.
In the state’s view, Kalshi serves as a market maker, takes a fee on every trade, and runs an affiliate that settles contracts and pays out winners.
Brown argued that any distinction between a market and a sportsbook “collapsed” once Kalshi started offering sports contracts and marketing them as betting. Brown said Kalshi told Americans it was the first nationwide sports betting platform and that they could legally bet on the NFL in all 50 states.
The state backs its case with Kalshi’s own data. As of February, nearly 33,000 Utahns held verified Kalshi accounts, Brown said. Utah estimates Kalshi collected $30.6 million to $61.2 million in fees from Utah accounts, while Utahns lost another $5.5 million on individual wagers.
Brown said Utahns could trade the contracts since at least 2024 and expects discovery to show exactly how much the defendants made.
“The harm isn’t abstract,” Brown said.
Where the Kalshi legal fight stands
Utah’s lawsuit arrives as the core question of sports-event contract jurisdiction heads toward the U.S. Supreme Court. The Third Circuit Court of Appeals sided with Kalshi in a case against New Jersey. Meanwhile, the Ninth Circuit in August and the Sixth Circuit in September rejected the argument that sports contracts qualify as federally protected swaps.
New Jersey filed its petition in September asking the justices to hear the case. Attorneys general from 39 states and the District of Columbia filed an amicus brief backing New Jersey. Other parties backing the state include:
- 145 Indian tribes and tribal organizations
- American Gaming Association
- Association of American Physicians and Surgeons
- Cabazon Band of Cahuilla Indians
- Casino Association of New Jersey
- Former CFTC and SEC Chairman Gary Gensler
- Former Sen. Chris Dodd
- International Association of Gaming Regulators
- National Council of Legislators from Gaming States
- National Football League
- North American Gaming Regulators Association
- Stop Predatory Gambling
- Texans Against Gambling
Kalshi’s response is due Nov. 9.
The CFTC also moved to settle the question through its own rules. Earlier this month, the agency adopted an interim final rule that excludes licensed, casino-style gambling products, including sportsbooks, from the swap definition and proposed a separate rule that would define event contracts on sports, politics, culture and weather as swaps.
The interim rule took effect on Monday, while the event contract proposal remains open for comment until Nov. 18.
