Utah Files Lawsuit Against Prediction Market Platform Kalshi

Utah is suing Kalshi for what the state calls a “brazen pattern of unlawful conduct” and is asking a judge to order the company to stop offering wagers in the state. It also wants the prediction market platform, used primarily for sports betting, to pay the millions it’s made through fees from wagers Utahns placed and that residents have lost through wagers. Gambling is illegal in Utah as part of the state’s constitution — and Kalshi is “well aware” of that, the complaint filed Tuesday in state court says. The prohibition hasn’t stopped gambling companies from operating in what they consider a legal gray area. Kalshi and other prediction markets claim event contracts are financial “swaps” sanctioned by the trading commission. But Kalshi functions the same way as “the manager of a back-alley gambling den,” the state argues, because the company acts as the market maker on its platform, facilitates bets and retains a portion of each bet as its own payment. The company even has an entity responsible for finalizing and settling wagers, including making payouts — something the state argues means it isn’t just a third-party trading platform. “It is administering a closed-loop wagering system, where it creates the games, handles the bets, and pays out the winners,” the complaint reads. Any attempted distinction between what it does and gambling “collapsed,” the complaint adds, once it started offering sports trading and started using language specifically referring to betting on professional football and other sports. Kalshi now offers “numerous” types of wagers, which the company refers to as event contracts, and is “regularly” adding more, the complaint says. It offered as many 100,000 to 300,000 open wagers, which it calls markets, per day in three months over the summer, according to the complaint. The state estimates Kalshi has made between $30.6 to $61.2 million in fees from wagers placed by Utah accounts through the fees it retains as a portion of each wager and that Utahns have lost $5.5 million in individual wagers. The event contracts or wagers, the state argues, are “indistinguishable from the format of bets offered through any sportsbook,” including proposition bets, parlays and betting on the spread of points in a game. Kalshi offers more than just sports betting. The complaint lays out various other kinds of wagers people can make, including: Elections with wagers like “Blue wave this year?” and “Closest Senate race this year?” Politics with options including “Trump’s approval rating Friday” and “Who will be arrested this year?” Culture wagers over things like who will headline Coachella in 2027 and the next James Bond. Mentions with wagers like whether Trump will mention Arizona at an investment announcement. The lawsuit follows a legal dispute with Kalshi, which tried to settle the question earlier this year when it preemptively sued Utah, alleging the federal government’s Commodity Futures Trading Commission has authority over the markets Kalshi runs. In August, a federal judge ruled for the state in its case against Kalshi, further advancing Utah’s ability to regulate prediction markets in the state. In response, Kalshi appealed the decision to the U.S. Circuit Court of Appeals.