Utah sues Kalshi for ‘brazen pattern’ of violating state’s gambling ban

Utah Attorney General Derek Brown filed a lawsuit against the major prediction market platform Kalshi on Tuesday, seeking to block the company from taking bets from Utahns. 

“Utah has said no to gambling since statehood in 1896, and that didn’t change when betting moved onto cellphones,” Brown said during a news conference at the Utah Capitol announcing the lawsuit. “Effectively, Kalshi bet today that Utah would not enforce its gambling laws. Well, we are enforcing it. So on that point, Kalshi has now lost their bet.” 

Kalshi is subject to Utah’s anti-gambling law, judge rules

The lawsuit filed in 3rd District Court alleges Kalshi has been violating state law and the Utah Constitution, which bans gambling in all forms. It also accuses the company of a “brazen pattern of unlawful conduct” that has “inflicted serious harm” on Utah and its residents, including “gambling-related” harm to Utahns’ mental health. 

To pay for those damages, the Utah Attorney General’s Office is asking a judge to force the company to pay the state “unjustly acquired profits,” plus restitution for other damages that the court deems fair. 

Kalshi and its affiliated companies acts like “the manager of a back-alley gambling den,” the complaint says, “by hosting and facilitating the gambling events and by taking a percentage fee (or ‘rake’) of amounts gambled.” 

In response to a request for comment, Kalshi spokesperson Jacki McGavick issued a prepared statement Tuesday afternoon standing by the company’s arguments that it falls under federal jurisdiction, not state. 

“Kalshi is a federally regulated financial exchange, like the stock market. Our customers trade with each other and set the prices,” 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 attorney general’s office estimates that Kalshi has made between about $30.6 million and $61.2 million in fees from “illegal wagers” placed by Utah accounts as of Monday — “a number that is increasing each day in which the Kalshi Enterprise operates in the state,” the complaint says. 

That number is based on the fee Kalshi rakes in — which the complaint says is $0.01 to $0.02 per wager — and the estimated more than $3 billion in wagers Utah accounts have placed across Kalshi’s lifetime. The complaint also says that Kalshi has more than 32,000 verified users in Utah, with more than $1 million “invested” on the exchange. 

“Based on the rapid increase in volume on the Kalshi platform, the actual volume attributable to Utah accounts is likely much greater,” the complaint says. 

Brown said that those profit estimates included in the complaint could grow as the lawsuit uncovers more information.

“The reality is, as we get discovery in the course of this civil complaint, we anticipate having more information that will help us understand exactly what it is that they’ve made and how they’ve done it in the course of effectively breaking Utah law,” Brown said.

Prediction market exchange Kalshi sues Utah over proposed prop betting ban

The Utah Attorney General’s Office said that even though Kalshi is “well aware that sports bets and other forms of gambling bets are illegal under Utah law,” the company “chose to begin offering gambling bets” to Utahns by as early as September 2024. 

That’s even though a recent federal order rejected Kalshi’s argument that it doesn’t need to adhere to Utah law, the complaint notes. The company has appealed, arguing it falls under federal, not state, jurisdiction. That federal lawsuit is ongoing. 

In the meantime, Utah’s lawsuit seeking tens of millions in damages is now positioned to play out in the state’s district court. 

When asked why his office filed a civil complaint rather than criminal charges against Kalshi for breaking Utah law, Brown told reporters that — for now — they’re focusing on a civil filing while they’ve been conducting research in “pretty extensive detail” on the company.

“When it comes to potential criminal filings … we don’t comment on existing criminal investigations or potential criminal investigations,” Brown said. 

Asked why his office is targeting Kalshi and not other prediction markets or gambling platforms, Brown also said that his office is “focusing on Kalshi” for now, “but for other companies that are operating here in Utah,” he urged them to read the complaint and follow Utah law. 

He also noted that Kalshi sued Utah in federal court, “and they effectively lost that action” when the federal court made it clear Utah can, in fact, enforce its regulations on the company. 

“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.”