Utah attorney general sues 'prediction market' Kalshi over alleged illegal gambling
by Cassidy Wixom ksl · KSL.comKEY TAKEAWAYS
- Utah Attorney General Derek Brown filed a lawsuit against Kalshi, accusing the platform of illegal gambling.
- The lawsuit claims Kalshi's activities violate Utah's gambling laws and cause substantial harm.
- Kalshi argues that its platform is not gambling but a federally regulated contract market.
SALT LAKE CITY — Utah Attorney General Derek Brown announced Tuesday morning that his office had filed a lawsuit against Kalshi, an online sports betting platform.
The complaint was filed in 3rd District Court, asking for all Kalshi enterprises to stop their "illegal conduct" of operating sports betting in Utah and compensate the state for alleged harm done to its citizens.
Kalshi is a popular online sports betting platform that allows users to also bet on real-world events. The company describes itself as a "prediction market," but "in reality, the Kalshi Enterprise is a gambling company," the attorney general's lawsuit states.
"Kalshi runs an online casino in Utah and calls it a prediction market. That violates Utah law," Brown said in a statement Tuesday.
Brown pointed out that Utah is one of just two states whose constitutions prohibit gambling.
"For 130 years, Utah has been clear: gambling has no place here, and we will enforce our laws," he said.
The lawsuit explains that Kalshi started off with just offering "event contracts" for purchase that focused on financial topics, but in 2024 and 2025, the company shifted to embrace traditional gambling bets, including on sports and elections.
Each wager is described as a "market," and at any given time, thousands of wagers are available in various categories of sports, elections, politics and culture. According to the suit, around 80% to 90% of wagers on the app are on sporting events.
"From a user's perspective, Kalshi's online gambling bets are indistinguishable from the bets offered by a traditional sportsbook," the suit states. "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," the suit states.
As of February, Kalshi had approximately 55,800 accounts that registered with a Utah address. As of Feb. 25, Utah-based accounts had entered into more than 5 million wagers, the lawsuit states.
Based on the average money Kalshi takes from each wager and how many wagers Utahns have entered into, the attorney general estimated that the fees collected total between $30.6 million and $61.2 million. The state wants that money recovered as part of its legal action.
The lawsuit claims Kalshi also profits from bettors who lose wagers and that the platform has almost three times as many account holders who are losing money than making money. If losses suffered by Utah bettors are proportional to all bettors on the platform, "then the Kalshi Enterprise has received at least $5.5 million in gambling profits from Utah residents as of May 2026," the complaint said.
Kalshi has "widely advertised" its gambling platform both nationally and across Utah, misleading Utahns into gambling under the guise of "prediction markets," the complaint states. Kalshi has used the marketing taglines of "The First Nationwide Legal Sports Betting Platform" and "Sports Betting Legal in All 50 States on Kalshi," the lawsuit said.
The lawsuit claims that Kalshi's "brazen pattern of unlawful conduct" has caused "substantial ongoing harm" to Utah residents and businesses.
Gambling causes harm "far beyond the economic losses," the lawsuit said, citing gambling as a "health harming activity" according to the World Health Organization. Gambling leads to people losing homes, savings and jobs, can result in escalated gambling-related criminal activity, and causes social costs to communities and families, the complaint said.
Kalshi's conduct of "operating, marketing, and profiting from illegal gambling activities" constitutes a "public nuisance" that is interfering with the state's public safety, public peace and public welfare, the lawsuit alleges. Kalshi's operations also created a "civil conspiracy" to violate Utah code by making profits from gambling in all 50 states, "regardless of the legality of such conduct under the laws of each State," the suit said.
The lawsuit asks for a trial by jury to decide the issues in the case, requesting a court judgment declaring Kalshi's wagers as illegal in Utah, injunctions prohibiting Kalshi from offering event contracts in the state, and awarding restitution and damages to compensate those in the state for losses suffered.
"Although (Kalshi enterprises) are well aware that sports bets and other forms of gambling bets are illegal under Utah law, (Kalshi) chose to begin offering gambling bets to Utah's residents by at least September 2024, something they continue doing despite a recent federal court order rejecting KalshiEx's argument that it is not bound by Utah law," the lawsuit said.
The recent court order referenced in the lawsuit deals with a federal complaint KalshiEX LLC filed in February against Gov. Spencer Cox and Brown. The complaint states that the company believed the state would "imminently bring an enforcement action against Kalshi with the intent to prevent Kalshi from offering event contracts for trading on its federally regulated exchange."
The filing also came after Brown published an editorial in February, saying he considers trading event contracts to be illegal in Utah and that he had a plan to address prediction markets operating in the state.
Xavier Sottile, the head of markets at KalshiEX LLC, filed a declaration against the state in April in that case, 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."
Sottile said that asking Kalshi to cease offering event contracts in Utah "on the mistaken assertion that these contracts constitute gambling" would result in Kalshi having to unilaterally void and refund all trades originating in Utah — an action the company described as "impossible or irreparably harmful."
Kalshi claims it does not operate like a sportsbook, where bets are placed against the "house," but instead "manages a federally regulated contract market and facilitates trades between different users on the platform," Sottile said.
"Traders do not bet against the house, but rather enter into contracts with other traders on an exchange. Kalshi has no interest in whether any given trade is successful or not; it charges a fee for each trade, which is set by a publicly disclosed formula," Sottile said.
Sottile claims that voiding all Utah-based trades would not only affect Utah-based users and transactions but would "wreak havoc on the entire Kalshi exchange ecosystem. … It is difficult to overstate how harmful this would be to Kalshi."
In August, a judgment was entered in favor of the state upholding its gambling laws against Kalshi, but Kalshi has since appealed that decision. The case is now ongoing in the Tenth Circuit Court of Appeals.
In a statement to KSL on Tuesday, Kalshi said the latest state court action will not affect the ongoing federal litigation.
"Kalshi is a federally regulated financial exchange, like the stock market. Our customers trade with each other and set the prices. As a national derivatives market overseen by the Commodity Futures Trading Commission, Kalshi answers to federal law, and no single state should have a veto over it," the company's statement said.
—Contributing: Madi Vollmer, KSL
The Key Takeaways for this article were generated with the assistance of large language models and reviewed by our editorial team. The article, itself, is solely human-written.