Utah sues Kalshi, seeking geolocation block and millions in alleged gambling proceeds

Utah Attorney General Derek Brown filed a state-court lawsuit Tuesday seeking to bar Kalshi from offering event contracts to Utah residents, alleging that the prediction-market company is operating an illegal online gambling business in a state that prohibits gambling in its constitution.

The 63-page complaint, filed in 3rd District Court, seeks an injunction covering sports, elections, politics, culture and other event bets. It also asks the court to require a court-approved geolocation provider to block Utah users, order disgorgement of allegedly unjust profits and award restitution and other damages. Brown said: “Kalshi runs an online casino in Utah and calls it a prediction market. That violates Utah law.”

The state alleges that Kalshi began offering bets to Utah residents by at least September 2024. It says the company and its affiliates jointly promoted the Kalshi website and app, accepted and held bettors’ money, paid winnings and retained a fee on each wager, functioning in the same way as a traditional sportsbook.

Utah estimates that more than $3 billion in lifetime wagers came from Utah accounts, at least 1.1% of Kalshi’s total activity. On an asserted fee of one to two cents per wager, the complaint puts Kalshi’s alleged Utah-derived fees at $30.6 million to $61.2 million as of Oct. 19.

More than 32,000 Utah residents had verified Kalshi accounts as of February, according to the complaint. The state estimates that Utah bettors lost at least $5.5 million, while stressing that the full amount it seeks will depend on disclosures of Kalshi’s profits from Utah users.

The defendants include Kalshi Inc.; KalshiEx; Kalshi Klear; Kalshi Trading; Susquehanna International Group; and Susquehanna Government Products. The complaint alleges that the Kalshi entities operated as an integrated enterprise and that Kalshi Trading and other affiliates acted as market makers, including by taking positions opposite customers.

Kalshi’s contracts pay users when their predictions about future events are correct, and the company has maintained that its federally registered exchange and sports-futures contracts fall under Commodity Futures Trading Commission oversight rather than state gambling law. Utah rejects that position, alleging the contracts are indistinguishable from sportsbook bets.

The new action follows Kalshi’s February federal suit challenging Utah’s authority after lawmakers added proposition bets to the state definition of gambling. A federal judge granted summary judgment to Utah in August, finding that federal commodities law did not preempt the state’s anti-gambling statutes. As reported in September, the 10th U.S. Circuit Court of Appeals then declined to halt Utah enforcement while Kalshi’s appeal proceeds.

Utah’s suit arrives amid a wider state-level fight over prediction markets. At least nine states have taken legal action against such platforms, while federal appellate decisions have differed: the Sixth and Ninth Circuits have allowed state gambling regulation of Kalshi’s contracts, while a Third Circuit decision found the contracts were not subject to New Jersey law.

Brown said Utah has prohibited gambling since statehood in 1896 and portrayed the case as an effort to apply that rule to online betting. The complaint seeks more than $300,000, placing it in Utah’s Tier 3 civil-case category, although the state says its claimed recovery could run to tens of millions of dollars.