Utah sues Kalshi over alleged gambling violations

Utah has filed a lawsuit against prediction market platform Kalshi, alleging the company violated the state’s gambling laws and collected substantial fees from residents.

Allegations and scope

The lawsuit alleges Kalshi collected between $30.6 million and $61.2 million in fees from Utah customers, according to the complaint. More than 32,000 Utah residents had verified accounts on the Kalshi platform as of February, according to the complaint.

The complaint names several Kalshi affiliates and trading firms Susquehanna International Group and Susquehanna Government Products as defendants, according to the filing.

Utah prohibits virtually all forms of gambling, including sports betting, casinos and lotteries, according to state law.

Federal jurisdiction dispute

Kalshi maintains that the Commodity Futures Trading Commission has exclusive jurisdiction over its event contracts as federally regulated financial derivatives. A Kalshi spokesperson said that as a national derivatives market overseen by the CFTC, Kalshi answers to federal law and no single state should have a veto over it.

The lawsuit follows an August federal court ruling that found Utah’s gambling laws are not preempted by federal commodities law. Kalshi appealed to the 10th Circuit, which subsequently denied its request for an injunction pending appeal.

Circuit split

The Third Circuit sided with Kalshi in its dispute with New Jersey, while the Sixth Circuit rejected the company’s federal preemption arguments in cases involving Ohio and Tennessee. New Jersey has asked the U.S. Supreme Court to resolve the dispute, drawing support from a bipartisan coalition of state attorneys general.