Utah Court Clears State to Enforce Gambling Ban Against Kalshi

US District Judge Robert J. Shelby has ruled that Utah may apply its anti-gambling laws to sports contracts offered by prediction market operator Kalshi, following a lawsuit the operator filed in February after Utah challenged the legality of its sports-event contracts. 

Kalshi had argued that its position as a federally regulated exchange under the oversight of the Commodity Futures Trading Commission placed its contracts beyond state gambling restrictions. The court rejected that position and found that federal commodities law did not displace Utah's authority to prohibit gambling, including prediction market apps, from within its borders.

“The court concludes the federal law relied upon by Kalshi does not preempt Utah’s ability to enforce its anti-gambling laws,” Shelby wrote. “It would be inconsistent for Congress to allow States to regulate their gambling laws but to simultaneously require States to provide citizens access to every event contract, including those that constitute gambling under State law.”

Kalshi offers contracts tied to game winners, scoring margins, player touchdowns, and other sports outcomes. Its markets also cover side events, including who performs during the Super Bowl.

The decision ended Kalshi's federal challenge at the district court level. It also left Utah's constitutional prohibition on gambling intact as the controlling rule for sports-based contracts offered to residents. 

Utah treats the online provision of gambling within the state as a third-degree felony. Earlier in the year, lawmakers cracked down on prop bets and daily fantasy “pick ‘ems” offered by the likes of DraftKings and FanDuel that previously skirted state gambling laws. 

New York pursues $36 billion in penalties against Kalshi

The Utah defeat came as Kalshi faces a separate challenge in the New York sports betting market, where Attorney General Letitia James sued the exchange for allegedly operating an illegal gambling business.

New York is seeking an order preventing Kalshi from offering sports-related prediction contracts without a state gambling license. The lawsuit also demands at least $36 billion in financial penalties tied to sports wagering revenue.

The state is pursuing an additional $100,000 fine for each alleged attempt to offer unlicensed sports betting. Those demands make the case one of the largest state actions against the prediction-market operator.

The lawsuit seeks to stop Kalshi's sports markets unless the company complies with state law. It also raises the possibility that the broader conflict could eventually reach the Supreme Court.

“New York’s gambling laws protect children from underage betting and help combat gambling addiction,” said Attorney General James in a statement. “No matter what they call themselves, prediction markets like Kalshi are gambling platforms, plain and simple. By ignoring our laws, Kalshi is running an illegal operation and harming New Yorkers in the process. We are taking them to court to uphold our laws and protect New Yorkers.”

Kalshi is fighting on separate fronts. Utah secured a district court judgment supporting state enforcement, while New York is pursuing substantial penalties and an injunction through its own court action.