Utah has filed a civil lawsuit against prediction market operator Kalshi, its affiliates and two Susquehanna trading firms, alleging violations of the state’s gambling laws and seeking up to $61.2 million in restitution and other financial remedies.
Attorney General Derek Brown announced the lawsuit Tuesday, October 20, in Utah’s Third District Court, seeking to prohibit Kalshi from offering sports, elections, politics, and culture contracts to state residents. The complaint also requests geolocation restrictions and the recovery of profits allegedly obtained through unlawful transactions.
According to the state, Kalshi generated between $30.6 million and $61.2 million in fees from Utah accounts, based on more than $3 billion in estimated wagers. The complaint identifies over 32,000 verified Utah users and estimates that residents lost an additional $5.5 million on individual wagers.
Brown said the figures could increase as the state obtains additional transaction records through discovery.
Susquehanna firms named in lawsuit
The lawsuit alleges that Kalshi facilitates gambling transactions, collects fees and operates an affiliated entity responsible for settling contracts and paying winners. Utah maintains that Kalshi’s event contracts resemble conventional sportsbook wagers, including proposition bets, parlays and point spreads.
The state also alleges that Kalshi began offering gambling contracts to Utah residents by September 2024 despite knowing that such activities were prohibited.
“Utah has said no to gambling since statehood in 1896, and that didn’t change when betting moved onto cellphones,” Brown said.
Utah’s constitution prohibits gambling in all forms, and the state does not permit lotteries, casinos, or sportsbooks. The complaint alleges that Kalshi’s activities caused financial losses and other harms, including gambling-related mental health consequences.
Kalshi rejected the allegations and reiterated its position that its operations fall under federal jurisdiction.
“Kalshi is a federally regulated financial exchange, like the stock market. Our customers trade with each other and set the prices,” spokesperson Jacki McGavick said. “As a national derivatives market overseen by the CFTC, Kalshi answers to federal law, and no single state should have a veto over it. This latest state court action does not affect our ongoing federal litigation.”
The inclusion of two Susquehanna trading firms marks the first known instance of market makers being named as defendants alongside a prediction market operator.
Susquehanna became a major liquidity provider for Kalshi approximately two years ago and expanded the partnership in August by supplying liquidity and pricing for a block trading arrangement involving Cantor Fitzgerald.
Federal jurisdiction dispute continues
The state lawsuit follows Kalshi’s unsuccessful federal challenge to Utah’s gambling regulations. Kalshi sued Utah officials in February, arguing that the Commodity Exchange Act gives the Commodity Futures Trading Commission (CFTC) exclusive jurisdiction over its event contracts.
In August, U.S. District Judge Robert Shelby rejected that argument and granted summary judgment to Utah. Kalshi appealed, but the Tenth Circuit Court of Appeals denied its emergency request for an injunction pending appeal in September. The appeal remains ongoing.
The dispute over prediction market regulation has produced conflicting federal appellate decisions. The Third Circuit sided with Kalshi in litigation involving New Jersey, while the Ninth and Sixth Circuits rejected arguments that sports contracts qualified as federally protected swaps.
New Jersey petitioned the U.S. Supreme Court in September, receiving support from attorneys general representing 39 states and the District of Columbia, alongside tribal organizations, gaming industry associations, regulators, the NFL and other groups.
Kalshi’s response is due November 9.
Meanwhile, the CFTC introduced an interim final rule excluding licensed casino-style gambling products, including sportsbooks, from the definition of swaps. The rule took effect October 19.
The regulator has separately proposed classifying event contracts involving sports, politics, culture and weather as swaps, with public comments open until November 18.
Brown said Utah is currently pursuing civil remedies and declined to discuss potential criminal investigations. He also warned other prediction market operators to comply with state regulations.
“Ultimately, this is part of a larger investigation,” Brown said. “But the reality is, Utah law is very specific. And under our system of government, every state can choose how they treat this issue.”