Utah Attorney General Derek Brown filed a lawsuit against Kalshi, a major prediction market platform, on Tuesday, seeking to prevent the company from accepting wagers from residents across the state. The legal action, filed in 3rd District Court, alleges that Kalshi has been violating state law and the Utah Constitution, which prohibits all forms of gambling. Brown's office asserts that the company's activities have caused "gambling-related" harm to Utahns' mental health and represents a "brazen pattern of unlawful conduct."
During a news conference at the Utah Capitol announcing the lawsuit, Attorney General Brown emphasized the state’s long-standing prohibition against gambling. "Utah has said no to gambling since statehood in 1896," Brown stated, underscoring that the ban remains in effect despite betting moving to digital platforms. Brown stated that Kalshi had effectively lost its wager by operating in the state, as Utah is enforcing its laws.
The complaint filed by the Attorney General’s Office describes Kalshi and its affiliated companies as acting like "the manager of a back-alley gambling den." It claims the platform hosts and facilitates gambling events, taking a percentage fee, or "rake," from amounts gambled. To address the alleged damages, the lawsuit asks a judge to compel Kalshi to pay the state "unjustly acquired profits" and provide restitution for other damages determined by the court.
In response to the lawsuit, Kalshi spokesperson Jacki McGavick issued a prepared statement Tuesday afternoon, maintaining the company's stance that it falls under federal jurisdiction, not state. McGavick stated that Kalshi operates as a federally regulated financial exchange, comparable to the stock market. She added that the company is overseen by the Commodity Futures Trading Commission (CFTC) as a national derivatives market and answers to federal law, arguing that no single state should have the authority to veto its operations. McGavick also noted that this state court action does not affect Kalshi’s ongoing federal litigation.
The Attorney General’s Office estimates that Kalshi has collected between $30.6 million and $61.2 million in fees from "illegal wagers" placed by Utah accounts as of Monday. This figure, which the complaint says is "increasing each day," is based on Kalshi's estimated fee of $0.01 to $0.02 per wager and more than $3 billion in wagers placed by Utah accounts over the platform's lifetime. The complaint also indicates that Kalshi has over 32,000 verified users in Utah, with more than $1 million "invested" on its exchange. Attorney General Brown suggested that these profit estimates could grow as the lawsuit proceeds through discovery, providing more information.
The Attorney General's Office asserts that Kalshi was well aware that sports bets and other forms of gambling are illegal under Utah law, but chose to offer "gambling bets" to Utahns "by as early as September 2024." This action allegedly occurred despite a recent federal order that rejected Kalshi's argument that it does not need to adhere to Utah law. The company has appealed that federal decision, arguing its federal jurisdiction, and that federal lawsuit is ongoing. Brown noted that Kalshi had previously sued Utah in federal court and had "effectively lost that action" when the federal court clarified Utah's ability to enforce its regulations on the company.
When asked why his office pursued a civil complaint instead of criminal charges against Kalshi, Attorney General Brown told reporters that the current focus is on the civil filing, following extensive research into the company. He declined to comment on existing or potential criminal investigations. Brown also explained that his office is "focusing on Kalshi" for now, but urged other companies operating in Utah to review the complaint and comply with state law. He described the lawsuit as "part of a larger investigation," emphasizing Utah's specific laws regarding gambling and each state's right to choose its approach to the issue.
