Utah sues Kalshi, its trading arm and Susquehanna, putting the other side of the trade on the complaint
Utah Attorney General Derek Brown sued Kalshi in the state’s Third Judicial District Court on Tuesday, naming the exchange, KalshiEx, along with its market-making arm, Kalshi Trading, and Susquehanna International Group, one of the largest market makers on Kalshi, firms that stand ready to take either side of a trade so a buyer always finds a seller, as The Salt Lake Tribune first reported. The state wants an order stopping Kalshi’s sports, election, culture and “mention” markets in Utah, a geofence around the state and repayment of money from bets it says broke Utah law. It is not seeking criminal charges, even though Utah law makes gambling a crime.
Brown filed after the federal court in Utah ruled in August that the state can enforce its gambling ban against Kalshi’s sports contracts. Kalshi started that fight, suing Utah earlier this year on the argument that the federal Commodity Futures Trading Commission oversees its markets, the Tribune reported, and it has appealed the August decision. “After that decision by a federal court, the bets kept on coming,” Brown said at a Tuesday press conference, according to InGame.
Utah is one of only two states, with Hawaii, whose law allows no gambling at all. The state calls Kalshi’s conduct a “brazen pattern of unlawful conduct,” per the Tribune, and the complaint alleges that KalshiEx “participates in the same way the manager of a back-alley gambling den (or cardroom) participates in gambling: by hosting and facilitating the gambling events and by taking a percentage fee (or ‘rake’) of amounts gambled.” It says Kalshi Trading acts “like a traditional sportsbook,” and it cites Kalshi ads in Utah promising the app was available “anywhere in the U.S.” Utah put the exchange’s in-house trading arm and one of its biggest outside market makers on the complaint beside the exchange, so a state judge now gets asked about the firms filling the other side of Utah customers’ trades, along with the venue that lists them.
The state’s numbers come from Kalshi. In a Feb. 25 filing in the federal case, Kalshi Head of Markets Xavier Sottile testified that 55,819 registered accounts had Utah addresses and 32,940 of them had completed sign-up and could trade, holding more than $5 million in open positions. Kalshi’s open interest, the total value of contracts still open, stood at $451.29 million then, which makes Utah 1.1% of it. InGame notes that Hawaii, with less than half Utah’s population, has about 100,000 registered users.
Utah then stretches that 1.1% across more than $300 billion in lifetime Kalshi volume. The complaint counts more than 3,059,160,000 “Illegal Wagers” from Utah accounts, treating each contract traded as one wager, and estimates Kalshi made $30,591,600 to $61,183,200 in fees from them, assuming fees of $0.01 to $0.02 per contract. InGame says Kalshi’s fees actually run from $0.0007 to $0.0175, averaging about $0.0075 over its history, which puts Utah fees closer to $22.7 million if the state’s volume estimate holds.
The state’s repayment demand rests on a share that Kalshi’s own executive put in the record, and the complaint argues the true Utah volume is “likely much greater” given how fast Kalshi has grown. Arguing over the per-contract rate still leaves Kalshi defending a number in the tens of millions built on its own testimony.
Kalshi has already geofenced Nevada, Michigan and Washington after state court rulings, and a Massachusetts injunction ordering the same is on appeal and not in effect. A win would make Utah the fourth state to block Kalshi’s sports contracts, per InGame, which adds that Kalshi has tried to move state cases into federal court without success so far.
Sources
- Utah sues Kalshi, saying it’s ‘the manager of a back-alley gambling den’ (The Salt Lake Tribune)
- Utah AG Sues Kalshi And Market Maker Susquehanna In State Court (InGame)
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