Utah likens Kalshi to a 'back-alley gambling den' in lawsuit naming Susquehanna firms

Utah sued Kalshi and two Susquehanna trading firms Tuesday, accusing them of running an illegal gambling business in the state.

Attorney General Derek Brown's lawsuit names five Kalshi companies alongside Susquehanna International Group and Susquehanna Government Products. Utah wants the companies to return money they allegedly made illegally, compensate the state and residents, and pay damages.

The complaint argues that calling bets "event contracts" does not change what Kalshi offers. It compares KalshiEx, which runs the platform, to "the manager of a back-alley gambling den" that hosts bets and takes a cut.

Utah is also going after the companies on the other side of users' bets. It alleges that Kalshi Trading and the Susquehanna firms act like a betting house by taking bets against users and collecting money when they lose.

Sports and gaming attorney Daniel Wallach described the case as the first state attorney general enforcement action targeting prediction-market market makers.

Utah estimates that Kalshi collected between $30.6 million and $61.2 million in fees from Utah-based accounts through Oct. 19, though it noted the actual number could be much higher or lower.

The state wants to block sports, election, politics, culture, and "mentions" bets. It also wants the companies to use more precise location-checking to enforce restrictions.

During a press conference, Brown criticized the prediction markets' appeal to users, especially young men. "To those of you who are ensnared in this addiction, please stop," he said.

"These companies, they're not your friends. They're not helping you invest. They're not providing you with insight or opportunity," he said. "Frankly, they are engineered to do one thing and one thing alone, and that’s empty your wallet."

Other suits against Kalshi

The case follows August lawsuits from Connecticut and Baltimore over alleged unlicensed sports betting. Baltimore also sued Kalshi's distribution partners Coinbase, Robinhood and Webull.

In September, a federal appeals court ruled that Ohio and Tennessee could enforce their sports betting laws against Kalshi. The court rejected Kalshi's argument that federal oversight protected it from state laws. Kalshi ultimately disagreed and said it expected the ruling to be overturned.

Brown said Utah was focused on Kalshi for now, but hinted that other platforms could potentially be targeted as well.

"Ultimately, this is part of a larger investigation," he said.