Utah Attorney General Derek Brown has announced the state’s intention to sue online sports platform Kalshi over its practices of prediction marketing, which he said constitutes illegal gambling in the state.
The complaint was filed in 3rd District Court and asks that Kalshi stop its online practices and compensate the state for alleged harm done to Utahns who have used the platform.
“Kalshi runs an online casino in Utah and calls it a prediction market. That violates Utah law,” Brown said in a statement. “For 130 years, Utah has been clear: Gambling has no place here, and we will enforce our laws.”
The AG’s office said Kalshi began offering what it called “event contracts” focused on financial topics. That changed two years ago when the majority of those contracts became wagers on sporting events as well as politics, elections and cultural events.
“From a user’s perspective, Kalshi’s online gambling bets are indistinguishable from the bets offered by a traditional sportsbook,” the suit stated. “The State of Utah is a sovereign state that is suffering and will continue suffering both imminent and substantial sovereign harms and financial injury directly traceable to (Kalshi)’s illegal gambling activities. The illegal wagers that (Kalshi enterprises) offer to Utah residents under the guise of ‘event contracts’ are indistinguishable from traditional forms of gambling, including bets offered through sportsbooks. These illegal wagers violate Utah’s prohibitions on gambling, fringe gambling and related conduct.”
Kalshi argues that its platform is not gambling but a federally regulated contract market. Xavier Sottile, the head of markets at KalshiEX LLC, filed a declaration against the state in April, claiming that complying with Utah’s anti-gambling laws would “introduce a new set of barriers and challenges that by themselves would subject Kalshi and its users to irreparable harm.” He said Kalshi does not operate like a sportsbook common on gambling sites like DraftKings, but instead “manages a federally regulated contract market and facilitates trades between different users on the platform.” He said Kalshi has no interest in whether a trade is successful. It charges a fee for each trade which he said is set by “a publicly disclosed formula.”
The state of Utah won a judgment concerning its gambling laws last August, a ruling that went against Kalshi, which appealed. That appeal is ongoing in the 10th Circuit Court of Appeals.