Utah Sues Kalshi and Market Maker Susquehanna in State Court, Casting Liquidity Providers as the House

Utah's Attorney General has sued five Kalshi companies and two Susquehanna firms in Salt Lake County, alleging that the market makers taking the other side of retail trades are gamblers and bookmakers under Utah law. A gaming lawyer calls it the first state enforcement action aimed at a prediction market's liquidity providers.

• Utah Attorney General Derek Brown sued five Kalshi companies, Susquehanna International Group and Susquehanna Government Products in the Third Judicial District Court in Salt Lake County on 20 October
• The complaint alleges that Kalshi Trading and the Susquehanna firms, as market makers, take the other side of retail bets and so participate in gambling; an election wagering claim targets those three alone
• Utah wants Kalshi's sports, election, politics, culture and mentions contracts declared illegal and blocked through a court-approved geolocation provider, plus restitution, disgorgement and punitive damages
• The state estimates Kalshi earned between $30.59 million and $61.18 million in fees from Utah accounts by 19 October, on an assumed fee of 1 to 2 cents a contract; it gives no profit figure for Susquehanna
• The suit follows Kalshi's federal defeat in Utah in August and the Sixth Circuit's 3-0 ruling for Ohio and Tennessee; Kalshi says it does not affect its federal litigation

Utah Names the Exchange, Its Clearing House and the Firms on the Other Side of the Trade

Brown announced the suit at the State Capitol on Tuesday, the day he signed a declaration that gambling in Utah is a public nuisance. Utah Code section 78B-6a-102(2) requires that determination before he can sue for public nuisance. Utah is one of two states, with Hawaii, that allow no gambling at all, and its constitution has barred the legislature from authorising "any game of chance" since 1896.

The complaint treats Kalshi as one "Kalshi Enterprise". KalshiEX, which runs the platform, is compared to "the manager of a back-alley gambling den" taking a "rake", and Kalshi Klear, the clearing house, to the dealer. Kalshi Trading, the in-house market maker, is alleged to take positions opposite retail bettors "as a regular business practice" and so to function "as a bookmaker".

Susquehanna Government Products, of Bala Cynwyd, Pennsylvania, is described as Kalshi's first dedicated institutional market maker, from around 3 April 2024. The complaint alleges that it and its parent routinely take the side opposite retail bettors, "including wagers placed by Utah residents", so that "in substance and effect" Susquehanna accepts gambling wagers from the public. In its card-room analogy, the market makers are the professional players "sitting at the table actively making bets". It alleges, on information and belief, that they took part in all or most wagers on the platform, and that the Susquehanna firms joined in exchange for "a share of the Enterprise's gambling profits". It gives no figure for what Susquehanna earned, though it cites a report that the few net winners on prediction markets are institutional traders, market makers among them. Robinhood Derivatives is listed as a Kalshi affiliate but not sued.

Seven Statutes, Five Counts and a Geofence

All defendants, Susquehanna included, are accused of participating in gambling under section 76-9-1402 and of deriving an economic benefit from it under section 76-9-1405. Kalshi Inc. and KalshiEX are also accused of permitting and offering gambling, possessing a gambling device and letting the website and app be used as a fringe gaming device. A claim under section 20A-1-606(2), which bars wagering on elections, is aimed only at the three market makers, over the 2024 and 2026 elections.

Those violations feed five counts: public nuisance, unjust enrichment, civil conspiracy with joint and several liability, a declaratory judgment and an injunction policed by a geolocation provider the court approves. The state is not pursuing criminal charges, according to InGame.

The money claims start from Kalshi's own evidence. In a 25 February declaration in Kalshi's federal suit, its head of markets, Xavier Sottile, said 55,819 accounts had registered with Utah addresses, 32,940 had completed sign-up, and Utah users held more than $5 million of open positions. Against $451.29 million of open interest that day, the state puts Utah's share at about 1.11% and extrapolates more than 3.06 billion "Illegal Wagers" and $5.5 million in retail losses. InGame notes that Kalshi's actual fees are lower than the 1 to 2 cents assumed, and puts a closer figure at about $22.7 million. Brown said discovery should show "exactly what it is that they've made", according to the Deseret News.

Kalshi spokesperson Jacki McGavick said Kalshi is "a federally regulated financial exchange, like the stock market", that "our customers trade with each other and set the prices", and that "this latest state court action does not affect our ongoing federal litigation". We found no public response from Susquehanna.

Kalshi sued Utah's governor and Attorney General in federal court in February. On 4 August Judge Robert J. Shelby granted Utah summary judgment, holding that federal commodities law does not override Utah's gambling ban, and the Tenth Circuit refused on 8 September to block enforcement pending appeal, according to the Attorney General's office. The appeal continues. No removal of the new case appeared on CourtListener on 21 October.

Naming the Market Maker Attacks the Peer-to-Peer Defence

Kalshi's answer to every state is that it is a neutral exchange where customers trade with each other, so there is no house. Utah quotes Kalshi's own website back at it: "every trade on Kalshi is a match between a market maker and a market taker". In the state's telling, if a Kalshi subsidiary or a contracted trading firm sits across from most trades, the house has simply been split across entities; the election claim, aimed only at the makers, follows from that logic. Daniel Wallach, a gaming lawyer, called it the first state attorney general enforcement action against prediction-market market makers, according to The Block. The economics matter too. Professional liquidity fills retail orders instantly, and Kalshi has used maker fees and exemptions to steer it. If quoting into a national order book carries state gambling exposure, the firms supplying depth will price that risk, and discovery of Susquehanna's records would show who sat across from Utah accounts.

Utah Chose a Forum Where Kalshi's Best Argument Is Only a Defence

In state court, preemption becomes a defence, and a defence cannot support removal. A state is generally not a citizen for diversity purposes, so Kalshi would need a federal question or the federal officer statute, the grounds a magistrate judge rejected when recommending Kentucky's Polymarket suit go back to state court. InGame reports that Kalshi has removed state suits in at least seven states, and that cases in Massachusetts, Michigan and Nevada were sent back. Operators still prefer federal court, which is why Crypto.com and Novig sued Missouri there this week. Susquehanna, which is not the exchange, arguably has a weaker claim than Kalshi to shelter under its federal registration.

Utah has turned a fight over federal preemption into a fight over who the house is. If a state court accepts that market makers are bookmakers, every firm quoting on a national prediction market will need a state-by-state answer.