Utah has filed a civil lawsuit against prediction market operator Kalshi and several trading firms, seeking to recover up to $61.2 million in allegedly unlawful fees and stop the platform from offering event contracts to state residents.
Summary
- Utah has sued Kalshi, affiliated companies and two Susquehanna trading firms over alleged illegal gambling.
- The state estimates Kalshi collected between $30.6 million and $61.2 million in fees from Utah-linked accounts.
- Attorney General Derek Brown wants the court to stop several categories of event contracts and order financial restitution.
- A federal judge ruled against Kalshi’s challenge to Utah’s gambling laws in August, but an appeal remains pending.
- Kalshi maintains that its event contracts fall under federal Commodity Futures Trading Commission oversight.
Attorney General Derek Brown accused Kalshi and its affiliates of facilitating illegal gambling since September 2024, in an October 20 court complaint. The case, filed in Utah’s Third District Court, names two Susquehanna trading companies alongside the prediction market operator.
Meanwhile, the lawsuit seeks an injunction against contracts covering sports, elections, politics, culture and mentions, along with restitution and the surrender of profits the state alleges were obtained illegally.
Utah targets Kalshi over $61 million in alleged betting fees
Brown’s office estimates that Kalshi collected between $30.6 million and $61.2 million in fees from accounts associated with Utah through October 19.
The calculation relies on the state’s estimate of more than three billion wagers placed by those accounts, with Kalshi collecting roughly one to two cents per transaction.
The complaint estimates that more than 32,000 verified users were based in Utah, a figure dating to February. It separately alleges that residents lost approximately $5.5 million through individual wagers.
Those amounts are estimates presented by the state. They have not been established as damages by a court, and the requested recovery could change as the parties exchange financial records.
At an October 20 press conference, Brown characterized the operation as a public nuisance that harmed Utah residents.
“We’re also asking the court to make the defendants give up the profits that they have made,” Brown said, describing the state’s request for restitution and other remedies.
Utah wants the defendants to implement court-approved geolocation measures that would prevent residents from accessing the disputed markets.
Susquehanna trading firms face claims alongside exchange operator
The case goes beyond Kalshi’s role in listing event contracts. Utah named Susquehanna International Group and Susquehanna Government Products, accusing the trading firms of participating in transactions that the state considers unlawful wagers.
According to the complaint, Kalshi Trading and the Susquehanna defendants acted as counterparties to customer positions, receiving money when customers lost.
The state argues that the defendants’ involvement resembles a gambling operation, even when transactions are described as event contracts and executed through a federally registered derivatives venue.
Kalshi disputes that characterization. Its spokesperson, Jacki McGavick, said the exchange operates under federal oversight and allows customers to trade against one another while determining market prices.
“As a national derivatives market overseen by the CFTC, Kalshi answers to federal law,” McGavick said in a statement responding to the lawsuit.
She maintained that individual states should not control access to the federally regulated platform and said the new state-court case would not affect Kalshi’s existing federal litigation.
Federal court ruling leaves prediction market appeal unresolved
Kalshi sued Utah officials in February, arguing that the federal Commodity Exchange Act prevented the state from applying its gambling restrictions to the platform’s sports contracts.
On August 4, U.S. District Judge Robert Shelby rejected that argument and granted summary judgment to Utah. The court’s written order found that federal commodities law did not preempt enforcement of the state’s gambling statutes.
Kalshi appealed to the Tenth Circuit. In September, the appeals court denied its request for emergency protection against state enforcement while the appeal proceeded.
As crypto.news reported in September, that decision allowed Utah to enforce its gambling restrictions without waiting for the appeal’s final resolution.
The October civil lawsuit is a separate proceeding seeking monetary remedies and restrictions on the defendants’ activities within the state.
New Jersey Supreme Court petition adds to legal uncertainty
Courts elsewhere have reached different conclusions about whether federal oversight prevents states from regulating prediction markets.
In New Jersey, the Third Circuit previously sided with Kalshi at the preliminary-injunction stage. State officials subsequently petitioned the Supreme Court to review the federal jurisdiction question.
The National Football League later supported New Jersey’s petition, arguing that sports integrity and consumer protections require continued state authority.
The Supreme Court has not agreed to hear the dispute. Kalshi’s response to the petition is due November 9.
Other states have pursued financial remedies through similar litigation. In July, New York sued the prediction market, seeking penalties over event contracts that officials alleged violated state gambling laws.
Utah’s latest complaint asks the state court to order restitution, surrender of alleged unlawful profits and additional relief after the defendants’ financial records are examined.