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Kalshi has gone on the offensive, filing a lawsuit in federal court against Utah officials even though the state has not yet taken direct enforcement action.
The company argues that public remarks from Governor Spencer Cox and Attorney General Derek Brown have created a real threat of prosecution under Utah’s strict anti‑gambling laws.
The complaint, lodged on February 23 in the U.S. District Court for the District of Utah, asks the court to block the state from applying its gambling statutes to Kalshi’s exchange, which is regulated by the Commodity Futures Trading Commission.
“Plaintiff KalshiEX LLC (‘Kalshi’ or ‘Plaintiff’) believes the Governor of Utah … and the Attorney General’s Office of Utah … will 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 company stated in its filing.
The lawsuit follows lawmakers’ push to expand the definition of gambling to cover proposition betting and sweepstakes games with HB243. Senior officials have already described prediction markets as unlawful.
Kalshi goes on the offensive
Kalshi’s lawsuit against Utah marks a different approach compared to its disputes in Nevada, Maryland, and Tennessee. In those states, regulators or attorneys general had already taken steps such as cease‑and‑desist orders or formal complaints.
Utah is different as it has not filed suit or launched criminal proceedings. Kalshi argues that the threat is still real, pointing to repeated public statements from Cox and Brown.
Governor Cox has been vocal about the issue, warning, “I think you’re going to see 50 states suing these guys in one way or another,” and insisting, “It’s illegal in Utah and will continue to be so.”
He also criticized the CFTC’s defense of prediction markets, writing on X, “I don’t remember the CFTC having authority over the ‘derivative market’ of LeBron James rebounds. These prediction markets you are breathlessly defending are gambling—pure and simple.”
He added, “Let me be clear, I will use every resource within my disposal as governor of the sovereign state of Utah, and under the Constitution of the United States to beat you in court.”
HB243 doesn’t target prediction markets
Utah lawmakers are moving HB243 forward as part of a wider effort to tighten the state’s gambling laws. The measure, sponsored by Rep. Joseph Elison, focuses on proposition betting and what the bill calls “fringe gambling.”
It narrows exemptions for sweepstakes and amusement devices, limiting rewards to non-cash prizes and cutting out gift cards or anything that can be redeemed for money. When asked about prediction markets, Elison described the issue as unsettled.
“It’s a huge gray area and there’s lots of lawsuits all over the country right now … debating this very thing, trying to find out what are the actual definitions,” he told the Utah News Dispatch. He added, “They’re flying under what’s called prediction markets, and prediction markets are regulated by the Federal Commodities Exchange. That’s why they’re able to do it.”
HB243 does not directly regulate prediction markets, but it reflects Utah’s intent to close loopholes in gambling law.
Kalshi legal battles continues
Utah is the latest front in Kalshi’s growing list of state disputes, but the situation looks different from its fights elsewhere.
In Tennessee, regulators issued a cease‑and‑desist order, and Kalshi responded with a lawsuit. A federal judge there recently granted a preliminary injuction, finding that Kalshi was likely to succeed on its claim that sports event contracts qualify as “swaps” under the Commodity Exchange Act and fall under the CFTC’s exclusive authority.
Maryland and Nevada courts have taken another path, allowing state enforcement actions to move forward at the preliminary stage and declining to fully embrace Kalshi’s federal preemption argument. Utah stands apart because no formal enforcement has been filed.
Source: Gambling Insider
