Utah Sues Kalshi and Two Susquehanna Firms, Seeking Up to $61.2m in Gambling Fees
Utah's attorney general has sued Kalshi and two trading firms owned by Susquehanna in state court, accusing the prediction market of running illegal gambling in a state that has banned every form of betting since 1896, and seeking up to $61.2 million in fees it says Kalshi took from Utah accounts.
- The civil complaint, filed on 20 October in Utah's Third District Court in Salt Lake County, asks for Kalshi's sports, election, politics and culture contracts to be barred in the state and for Utah users to be geoblocked.
- Utah estimates Kalshi earned between $30.6 million and $61.2 million in fees on more than $3 billion of estimated wagers from over 32,000 verified Utah users.
- It is the first known case to name market makers as defendants alongside a prediction market operator.
Attorney General Derek Brown announced the lawsuit on Tuesday 20 October. It names Kalshi, its affiliated companies and two Susquehanna trading firms, and alleges that Kalshi was offering contracts to Utah residents by September 2024 while knowing that gambling was prohibited in the state, Yogonet reported.
"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 bans gambling in all its forms. The state has no lottery, no casinos and no sportsbooks, which makes it one of the hardest places in the country for a prediction market to argue that its sports contracts are something other than bets.
What Utah Is Asking For
The state wants the court to stop Kalshi offering sports, election, politics and culture contracts to Utah residents and to order it to use a third-party geolocation provider to keep them off the platform. It is also seeking restitution for residents' losses and disgorgement of the money the defendants made from Utah.
According to the complaint, Kalshi took between $30.6 million and $61.2 million in fees from Utah accounts on more than $3 billion of estimated wagers. It identifies more than 32,000 verified Utah users and estimates that residents lost a further $5.5 million on individual wagers. Brown said the figures could rise once the state obtains more transaction records through discovery.
Kalshi's own court filings point to a bigger footprint. Data from the lawsuit it brought against Utah in February showed about 56,000 accounts registered to Utah addresses, which had made more than five million individual trades, Utah Public Radio reported.
A 'Back-Alley Gambling Den'
The complaint does not soften its language. It says Kalshi takes part in gambling "in the same way the manager of a back-alley gambling den (or cardroom) participates", by hosting the events and taking a percentage fee, or rake, of the amounts staked, Covers reported.
Utah also targets Kalshi's marketing. The lawsuit cites taglines such as "Sports Betting Legal in All 50 States on Kalshi" and says the company kept accepting trades from Utah residents after a federal judge had ruled that state law applied to it.
Why Susquehanna Is in the Case
Naming Susquehanna is the most significant step in the filing. The trading group became a major liquidity provider on Kalshi about two years ago and expanded the relationship in August, when it began supplying liquidity and pricing for a block trading arrangement involving Cantor Fitzgerald.
Utah argues that, as a market maker taking the other side of residents' trades, Susquehanna profited directly from illegal bets placed in the state. No state had previously sued a prediction market's market makers, and the move puts the firms that supply much of the sector's liquidity on notice that they could share in any liability.
Kalshi Says Federal Law Comes First
Kalshi rejected the allegations. "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, adding that the company answers to federal law and that "no single state should have a veto over it". She said the state court action does not affect Kalshi's federal litigation.
That federal fight has so far gone Utah's way. Kalshi sued Utah officials in February, arguing that the Commodity Exchange Act gives the Commodity Futures Trading Commission (CFTC) exclusive authority over its event contracts. In August, US District Judge Robert Shelby rejected that argument and granted summary judgment to Utah. The Tenth Circuit Court of Appeals refused Kalshi's emergency request for an injunction in September, and the appeal continues.
Brown described the lawsuit as "part of a larger investigation", declined to say whether criminal charges were being considered and warned other prediction market operators to follow state law.
A Widening Legal Front
The case adds to a long list of disputes between prediction markets and the states, from Iowa to Nevada. Four days earlier, Polymarket US sued Ohio's regulators in federal court over a cease-and-desist demand, while Kalshi continues to post record trading volumes.
There is a split between the federal appeals courts on the central question. The Third Circuit sided with Kalshi in its New Jersey case, while the Sixth and Ninth Circuits ruled that sports contracts are not protected from state gambling laws. New Jersey petitioned the US Supreme Court in September with the backing of attorneys general from 39 states and the District of Columbia. Kalshi's response is due on 9 November, although it has asked for a month's extension.
Federal rules are moving at the same time. The CFTC's interim final rule excluding state-licensed sportsbook wagers and casino games from the definition of a swap took effect on 19 October, and a companion proposal would expressly treat sports, politics, culture and weather event contracts as swaps. Comments on both close on 18 November.
