Utah names Susquehanna market makers in Kalshi gambling lawsuit

Utah’s lawsuit against Kalshi also targets two Susquehanna trading firms, alleging that their market-making activity helped make unlawful gambling wagers available to Utah residents. The complaint names Susquehanna International Group LLP and Susquehanna Government Products LLLP alongside five Kalshi entities, and seeks to stop the defendants from offering sports, election, political and culture contracts in the state.

The case, filed Oct. 20 in Utah’s Third District Court, is the first known instance of market makers being named as defendants alongside a prediction-market operator, according to Yogonet. It follows the state’s action against Kalshi, which we reported Tuesday.

Utah alleges that Susquehanna Government Products became Kalshi’s first dedicated institutional market maker on or about April 3, 2024. The state says the firm created, bought and sold event contracts and routinely took the other side of retail wagers, including those placed by Utah residents. It alleges that Susquehanna International, its parent, also acted as a market maker and institutional counterparty.

The complaint makes comparable allegations about Kalshi Trading LLC, which Utah characterises as an in-house institutional counterparty that stood ready to take positions opposite public bettors. That practice, the state says, kept wagers available and allowed them to be placed and settled at scale. Utah alleges that the Kalshi entities and Susquehanna Government Products accepted gambling wagers and profited from the activity.

Market makers generally post bid and ask prices, providing liquidity when another customer is not immediately available to take the opposite side of a trade. Front Office Sports has reported that, unlike a conventional sportsbook setting prices as the house, multiple market makers can compete to supply that liquidity on prediction markets.

Utah argues that the practical experience for a Kalshi user is indistinguishable from betting with a traditional sportsbook. The complaint cites Kalshi marketing that called its service “The First Nationwide Legal Sports Betting Platform” and said sports betting was legal in all 50 states on Kalshi. Kalshi has countered that it is a federally regulated financial exchange where customers trade with each other and set prices.

The state seeks geolocation restrictions, recovery of allegedly unlawful profits and compensation for claimed harm to Utah and its residents. It estimates that more than 32,000 verified Utah users placed more than $3 billion in wagers, generating between $30.6 million and $61.2 million in Kalshi fees, plus an estimated $5.5 million in individual losses. The complaint is a Tier 3 civil case, meaning the claimed monetary recovery exceeds $300,000, while Attorney General Derek Brown has said the totals could rise as the state obtains more records.

The action came after Utah prevailed in August in Kalshi’s federal pre-emption case. The federal district court held that the Commodity Exchange Act did not prevent Utah from enforcing its anti-gambling laws, and the 10th U.S. Circuit Court of Appeals later denied Kalshi’s emergency bid to halt state enforcement while its appeal proceeds. Utah’s constitution bars the legislature from authorising games of chance, lotteries or gift enterprises, and state law criminalises, among other conduct, online gambling promotion.

A separate New Jersey petition asking the U.S. Supreme Court to review the wider state-versus-federal dispute remains pending; Kalshi’s response is due Nov. 9.