Kalshi Sues Utah Governor, Attorney General For Prediction Market Comments

• Kalshi has levied a lawsuit against Utah Gov. Spencer Cox (R) and Attorney General Derek Brown
• The lawsuit seeking injunctive and declaratory relief from the state
• Kalshi pointed to recent comments from Gov. Cox and Brown that make the company believe enforcement actions will be taken against event contracts

Kalshi this week added another state to its list of ongoing lawsuits, as it sued Utah Gov. Spencer Cox and Attorney General Derek Brown in U.S. District Court.

The company took action against the state following recent alleged comments from Gov. Cox and Brown, in which the prediction market company said the two publicly expressed opinions that Kalshi was operating illegally under Utah’s anti-gambling laws and would likely take legal action against the company for its offerings.

“Utah’s stated intent to prohibit Kalshi from operating is a form of regulation that intrudes upon the federal regulatory framework that Congress established for regulating derivatives on designated exchanges,” Counsel for Kalshi noted in its lawsuit.

Suing Utah Before State Takes Action

Kalshi noted multiple times in its lawsuit against that it is taking action before the state can take legal action against the company. Kalshi pointed to recent comments made by Gov. Cox in a Bloomberg article in which he said “I think you’re going to see 50 states suing these guys in one way or another” and that businesses like Kalshi are “illegal in Utah and will continue to be so.”

They also expressed concern over a recent op-ed written by Brown in Desert News, in which the attorney general reference Kalshi by name and “stated he has a plan to address prediction markets operating in the state.” The lawsuit also believes that Brown’s views in the op-ed clearly show he believes their offerings to be illegal.

Kalshi, in the lawsuit, claimed it tried to contact Utah’s attorney general to inquire if the state was preparing to take action against the company for its prediction market services, but its inquiries were never returned.

“Kalshi is a federally designated derivatives exchange, subject to the CFTC’s exclusive jurisdiction. It offers consumers the chance to trade in many types of event contracts. These contracts are subject to exclusive federal oversight, and—critically—they are lawful under federal law. Thus, they are also lawful under Utah’s own anti-gambling laws which provide a carveout for “lawful business transaction[s],'” Kalshi noted in it lawsuit.

The company is requesting a preliminary and permanent injunction prohibiting Utah from enforcing action against its prediction market offerings.

Same Issue at Play in Lawsuit

Kalshi’s lawsuit against Gov. Cox and Brown – and all of its lawsuits against state gaming commissions – revolves around the central question of who regulates sports event contracts, and prediction markets, in general.

Companies such as Robinhood, Kalshi, and Crypto.com believe that state regulatory bodies do not have the right to intrude on the government’s “exclusive” authority to regulate prediction market, filing lawsuits in New Jersey, Nevada, and Maryland to defend its practices. These companies believe the CFTC is the only regulatory body that can legally block contracts from being offered to customers.

State gaming regulators maintain the markets need to be beholden to regulations, taxes, and license fees that sports betting and gaming operators are required to follow.

The prediction market companies believe their offerings are not required to comply with state laws, as they have been preempted by the Commodity Exchange Act.