Utah sues Kalshi to halt sports and election betting, seeking millions in damages

Utah has launched a major legal challenge against prediction-market operator Kalshi, seeking to stop the company from offering sports wagers and contracts tied to elections, politics, culture and other real-world events within the state.

The lawsuit alleges that Kalshi is operating an unlawful gambling business in violation of Utah’s constitutional prohibition on gambling and demands that the company surrender its alleged profits and compensate residents for financial losses.

Filed on October 20, 2026, in Utah’s Third District Court, the action was brought by Attorney General Derek Brown, who argues that the company’s description of its products as financial event contracts does not change their essential nature as bets. The state is seeking court orders prohibiting the activities, restitution and damages, as well as measures to prevent Utah residents from accessing the disputed markets.

Utah’s complaint characterises Kalshi’s conduct as a “brazen pattern of unlawful conduct” and contends that the platform has continued operating despite repeated warnings that its activities violate state law. Utah is one of only two US states whose constitutions prohibit gambling, making the dispute a significant test of whether federally regulated prediction markets can offer products that state authorities consider illegal betting.

At the heart of the case is a fundamental disagreement over jurisdiction: Kalshi maintains that its markets operate under federal commodities regulation, while Utah argues that the state retains the authority to prohibit gambling within its borders.

State alleges Kalshi operates as an online gambling business

The complaint argues that Kalshi’s products are functionally equivalent to bets offered by conventional sportsbooks. Although the company calls its products “event contracts” and presents its platform as a prediction market, Utah maintains that customers are wagering money on uncertain outcomes in exchange for potential financial returns.

“Kalshi runs an online casino in Utah and calls it a prediction market. That violates Utah law,” Brown said.

The attorney general also emphasised the state’s longstanding opposition to gambling, declaring: “For 130 years, Utah has been clear: gambling has no place here, and we will enforce our laws.”

According to the lawsuit, Kalshi initially concentrated on financial-market events but expanded into more conventional betting categories during 2024 and 2025. Sports and election-related markets became a central part of its business. The state estimates that approximately 80% to 90% of wagers placed through the platform involve sporting events.

The complaint argues that the platform’s markets closely resemble established sportsbook products, including wagers on game outcomes, point spreads, individual player performances, parlays and other proposition bets.

Utah contends that the terminology used to describe these transactions cannot exempt them from gambling restrictions. In the state’s view, the relevant question is what customers actually do on the platform, rather than how the company classifies its contracts under federal financial regulations.

The complaint states that the wagers offered to Utah residents under the label of event contracts are “indistinguishable from traditional forms of gambling, including bets offered through sportsbooks.” It further argues that the activities violate Utah’s prohibitions on gambling, fringe gambling and related conduct.

The state also challenges the company’s operational structure. According to the complaint, Kalshi does more than provide a neutral venue where independent traders exchange contracts: its associated businesses facilitate transactions, participate in the market-making process and collect revenue connected to the wagers.

The complaint compares KalshiEx, the entity operating the platform, to “the manager of a back-alley gambling den.” It alleges that related companies, including Kalshi Trading and firms affiliated with Susquehanna, participate on the other side of customers’ trades and can benefit when users lose.

Utah argues that these arrangements make the business resemble a gambling operation rather than a conventional financial exchange.

Millions of dollars in fees and customer losses at issue

A major component of Utah’s case concerns the money generated through the platform’s activity in the state.

The lawsuit estimates that Kalshi collected between approximately $30.6 million and $61.2 million in fees associated with Utah-based accounts. The estimate is based on the number of wagers placed and the fees the company reportedly collects on transactions.

The state alleges that Kalshi charges fees of roughly one to two cents per wager, with the overall amount depending on the volume of trading. Officials acknowledge that the estimate may change as the case proceeds and additional financial records become available.

Brown said further evidence gathered through the litigation should help the state determine the precise amount the companies earned from their Utah operations.

The complaint also estimates that Utah residents collectively lost at least $5.5 million through wagers on the platform. That figure is based on reported nationwide customer losses and an estimate of Utah’s share of the activity, rather than a complete accounting of every resident’s individual transactions.

According to the lawsuit, the platform has nearly three times as many account holders losing money as account holders making money. Utah argues that the alleged customer losses, combined with the fees collected by the company, demonstrate the financial consequences of allowing the disputed markets to operate.

The complaint identifies substantial use of the platform by people with Utah addresses. It reports that, as of February 2026, approximately 55,800 accounts had registered Utah addresses and that those accounts had entered into more than five million wagers by February 25.

Another estimate cited in the litigation puts the proportion of Kalshi wagers involving Utah accounts at approximately 1.1%, with more than $3 billion wagered across those accounts as of October 19, 2026. The precise account figures vary across the reported estimates, which refer to different measures and dates.

Utah is seeking to recover the allegedly unlawful proceeds, obtain restitution for affected residents and secure damages through the court proceedings.

State seeks restrictions across sports, politics and culture markets

The proposed legal restrictions extend well beyond sporting events. Utah wants the court to prohibit Kalshi from offering contracts in several categories, including elections, political developments, cultural events and markets based on whether particular people or subjects will be mentioned.

Election-related examples identified in the complaint include markets asking whether there will be a “Blue wave this year?” and which Senate race will be the closest.

Political markets include wagers concerning President Donald Trump’s approval rating on a particular Friday and whether a particular person will be arrested during the year.

Cultural markets cover subjects such as who will headline Coachella in 2027 and who will be selected as the next James Bond. Other contracts concern whether Trump will mention Arizona during an investment announcement.

Utah argues that these markets are part of the same underlying business model: customers pay to take positions on uncertain future events and can receive financial returns depending on the outcome.

Brown said the state was asking the court to halt sports, election, politics, culture and mention-based wagers within Utah.

The state is also seeking the use of a court-approved geolocation provider to enforce any resulting restrictions. Such a requirement would be intended to establish where customers are located and prevent residents from accessing prohibited markets.

In addition to a permanent prohibition on the disputed activities, Utah is seeking a jury trial, a declaration that the contracts are unlawful under state law, restitution, compensatory damages and other relief addressing the alleged public harm.

The complaint names several entities associated with the operation, including KalshiEx, Kalshi Klear and Kalshi Trading, as well as Susquehanna International Group and Susquehanna Government Products.

The inclusion of the related businesses reflects the state’s contention that responsibility for the alleged gambling operation extends beyond the company that directly operates the consumer-facing platform.

Utah argues gambling creates a wider public harm

The lawsuit does not limit its allegations to financial losses suffered by individual users. It argues that the companies’ conduct threatens public welfare and imposes broader social costs on Utah communities.

The complaint describes gambling as an activity that can cause harm “far beyond the economic losses” and cites the World Health Organization’s characterisation of gambling as a health-harming activity.

It alleges that gambling-related problems can contribute to the loss of homes, savings and employment, increase the risk of gambling-related criminal activity and impose costs on families and communities.

On that basis, the state characterises the companies’ alleged conduct as a public nuisance that interferes with public safety, public peace and public welfare.

The complaint also alleges a civil conspiracy to violate Utah law, arguing that the companies have pursued profits from gambling-related activities nationwide regardless of whether those activities are lawful in individual states.

Brown used particularly forceful language when discussing the companies’ appeal to customers, especially younger men.

“To those of you who are ensnared in this addiction, please stop,” he said.

He added: “These companies, they're not your friends. They're not helping you invest. They're not providing you with insight or opportunity.”

“Frankly, they are engineered to do one thing and one thing alone, and that’s empty your wallet.”

The state’s position is that these products should be assessed according to their practical effects on consumers, not simply as financial instruments subject to federal oversight.

Kalshi maintains federal law governs its exchange

Kalshi rejects Utah’s central argument and maintains that it operates a federally regulated financial exchange rather than a conventional sportsbook.

The company’s position is that customers trade contracts with one another, with prices determined by the market, and that Kalshi collects transaction fees rather than relying on customers losing bets against the company.

In an earlier court filing, Xavier Sottile, head of markets at KalshiEX, argued that complying with Utah’s proposed restrictions would create serious difficulties for the company and its users.

He said that forcing Kalshi to stop offering event contracts in Utah on the basis that they constitute gambling would require it to unilaterally void and refund trades originating in the state. The company described that outcome as “impossible or irreparably harmful.”

Sottile also argued that unwinding Utah-based transactions could affect more than local customers and disrupt the broader exchange.

In his declaration, he said such a requirement would “wreak havoc on the entire Kalshi exchange ecosystem,” adding that “it is difficult to overstate how harmful this would be to Kalshi.”

The company’s broader legal argument rests on its status as a federally registered exchange overseen by the Commodity Futures Trading Commission (CFTC). Kalshi contends that federal commodities law governs its markets and limits the ability of individual states to interfere with their operation.

In a statement responding to the new lawsuit, Kalshi spokesperson Jacki McGavick said:

“Our customers trade with each other and set the prices. 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 company’s argument distinguishes its model from a traditional sportsbook, where a customer places a wager against the operator. Kalshi instead says its platform facilitates contracts between traders, with the company charging a fee determined by a publicly disclosed formula.

The dispute therefore centres on whether federal regulation of the exchange is sufficient to protect its event contracts from state gambling prohibitions, or whether states retain authority to restrict contracts that function as sports bets.

Previous federal ruling strengthens Utah’s position

The new lawsuit follows an earlier legal confrontation initiated by Kalshi itself.

In February 2026, KalshiEX filed a federal lawsuit against Utah Governor Spencer Cox and Attorney General Brown, seeking to prevent the state from enforcing its gambling laws against the company. Kalshi argued that its federal registration placed its exchange under the authority of the CFTC and that state restrictions would improperly interfere with the federal regulatory framework.

Utah rejected that position.

On August 4, US District Judge Robert J. Shelby ruled in favour of the state, concluding that Utah’s gambling laws applied to the sports contracts Kalshi offered and that the relevant federal commodities legislation did not displace the state’s authority to enforce its anti-gambling statutes.

The ruling was a significant setback for Kalshi’s attempt to establish that federal registration shielded its sports markets from state-level gambling enforcement.

Kalshi subsequently appealed the decision to the US Court of Appeals for the Tenth Circuit. In September, the company also failed to obtain an injunction preventing Utah from enforcing its laws while the appeal proceeded.

The state’s latest action builds on that legal outcome. Utah argues that Kalshi continued offering wagers to residents from at least September 2024 despite knowing that state law prohibited gambling and despite the subsequent federal ruling rejecting its principal jurisdictional argument.

The complaint also points to Kalshi’s advertising, alleging that the company promoted its services nationwide and in Utah with slogans such as “The First Nationwide Legal Sports Betting Platform” and “Sports Betting Legal in All 50 States on Kalshi.”

Utah argues that these messages misled residents into believing the platform’s wagers were lawful throughout the country.

The lawsuit further alleges that a Kalshi representative filmed an advertisement on the campus of Brigham Young University, a private university sponsored by The Church of Jesus Christ of Latter-day Saints.

The state’s broader contention is that marketing a platform as legal nationwide does not override individual states’ gambling laws.

Wider national battle over prediction markets

Utah’s lawsuit forms part of a growing national dispute over the legal status of prediction markets, whose operators offer contracts linked to the outcomes of sports, elections and other events.

The state is among a widening group of jurisdictions challenging such platforms. By October 2026, at least nine states had initiated legal actions against prediction-market companies, with most pursuing civil proceedings and at least one, Arizona, filing a criminal complaint.

Other disputes have emerged over whether platforms offering sports-related contracts require the same authorisations as conventional sports-betting operators.

Utah previously joined dozens of states in challenging the scope of federal oversight over sports-related event contracts, arguing that allowing such products to operate under commodities regulation could undermine state gambling restrictions.

The legal debate is complicated by the different regulatory frameworks involved. Federal commodities law governs registered derivatives exchanges, while individual states traditionally regulate gambling within their borders. The central question is where financial contracts end and prohibited wagering begins.

For Utah, the distinction is straightforward: if a customer risks money on a sporting event or another uncertain outcome in exchange for a potential payout, the transaction may constitute gambling regardless of the terminology used by the platform.

Kalshi, by contrast, maintains that its exchange structure and federal oversight distinguish its products from conventional betting.

The outcome of the litigation could have implications for how prediction-market operators structure their businesses, market their services and restrict access in states with stringent gambling laws.

Religious opposition adds to Utah’s stance

The dispute has also unfolded against a broader backdrop of opposition to gambling within Utah, where religious and cultural objections have long influenced public policy.

Earlier in October, D. Todd Christofferson, a member of the First Presidency of The Church of Jesus Christ of Latter-day Saints, condemned gambling, including prediction markets, during the church’s general conference.

“For us as Latter-day Saints, overarching all other concerns is the fact that gambling is morally wrong,” Christofferson said.

“Gambling is built on the desire to obtain something for nothing. Its structure requires that any gain comes at others’ expense. It’s hard to reconcile that with the commandment to love our neighbor as ourselves.”

The comments reflect the state’s wider social and political opposition to gambling, although the legal case itself will turn on statutory interpretation, the nature of Kalshi’s contracts and the relationship between federal and state regulatory authority.

Brown has argued that prediction markets should not be treated as investment tools simply because they are presented through a financial-exchange structure.

The state is asking the court to determine that the challenged activities violate Utah law and to order the companies to stop offering them to residents.

Legal battle remains unresolved

Utah’s October 20 lawsuit seeks to convert the state’s earlier legal victory into direct enforcement against Kalshi and its related businesses. The state wants to prohibit the disputed contracts, strengthen location-based restrictions, recover the money it alleges was unlawfully earned and obtain compensation for financial and public harms.

Kalshi continues to argue that its products are federally regulated contracts rather than gambling and that individual states should not be able to block its exchange.

The dispute remains unresolved. The new state-court case must address Utah’s allegations, while Kalshi’s appeal of the earlier federal ruling continues separately.

For now, Utah’s position is that federal registration cannot be used to circumvent a constitutional ban on gambling. Kalshi’s position is that its federally regulated exchange cannot be treated as a local sportsbook simply because its contracts involve sporting and other real-world outcomes.

The court proceedings will determine how those competing claims apply to Kalshi’s operations in Utah and whether the company must stop offering the disputed markets and surrender the proceeds the state says it has collected unlawfully.

By fLEXI tEAM