- Utah sued five Kalshi entities and two Susquehanna firms, alleging they facilitated illegal gambling.
- The state estimates Kalshi collected $30.6 million to $61.2 million in fees from Utah accounts.
- The lawsuit extends the prediction-market legal fight from exchanges to firms providing market liquidity.
On October 20, Utah brought a lawsuit against Kalshi’s five companies and two trading companies that belong to Susquehanna, alleging illegal gambling and asking for restitution, injunctions and disgorgement in accordance with the complaint issued by the state.
By going after companies that run the markets for Kalshi, Utah is expanding the legal battle beyond just the exchange.
Why the Susquehanna defendants matter
The lawsuit also involves Susquehanna International Group and Susquehanna Government Products. The state of Utah contends that the companies function as market makers and take the opposite position on trades initiated by retail consumers. This means that these companies provide their clients with pricing for the purchase and sale of contracts, allowing trading to continue and minimizing fluctuations in price.
If states are able to make these companies accountable in addition to exchanges, it is possible for the legal risks to run throughout the industry. However, the claims are not yet verified and neither company has been shown to be liable.
According to the estimates of Utah, Kalshi has received amounts between $30.6 million to $61.2 million in fees from accounts in the state. As reported by Utah News Dispatch, Attorney General Derek Brown demands the halting of the alleged illegal gambling along with the return of the money collected by Kalshi.
Federal oversight faces conflicting court rulings
Kalshi argues that, since it operates a designated contract market regulated by the Commodity Futures Trading Commission (CFTC), its event contracts are therefore subject to federal regulation. Hence, the firm argues that states cannot classify such contracts as illegal gambling.
The CFTC has broad authority over swaps under 7 U.S.C. § 2, but the statute recognizes that the authority of other federal and state regulators and courts remains intact. Utah contends that this allows it to enforce its gambling laws against sports contracts offered by Kalshi. Kalshi, on the other hand, argues that federal law dominates the issue.
Courts have reached varied conclusions. On August 4, a court in Utah ruled that Kalshi’s claims about federal supremacy over state gambling laws were incorrect. The Third Circuit agreed with Kalshi in New Jersey, but the Ninth and Sixth Circuits supported the states in separate cases.
Cryptopolitan previously reported on the ongoing case in Connecticut. Attorney General William Tong filed a lawsuit against Kalshi on August 26 to stop what state officials believe is illegal sports betting.
The lawsuit came after a federal court ruling on August 10 that rejected Kalshi’s efforts to stop the enforcement of Connecticut’s gambling laws. The court held that the contracts for sports betting are not covered by federal law as swaps. Kalshi contested the court’s ruling and said that the CFTC regulation takes precedence over state law.
The CFTC has also moved to defend its authority. It sued three states on April 2 and proposed rules on October 9 that would explicitly classify event contracts as swaps. Neither action settles Utah’s latest lawsuit.
A $394 billion market confronts legal boundaries
Artemis data as of October 21 puts trailing-year prediction-market trading volume at $394.2 billion. Kalshi accounted for $309.8 billion and Polymarket $84.4 billion. Sports contracts generated $169.9 billion, or 43.1% of the total. These figures measure trading activity, not revenue.
Legal pressure on market makers could widen spreads, weaken liquidity or push trading elsewhere, including offshore. However, there is no evidence that Susquehanna has withdrawn from Kalshi.
The regulatory divide extends overseas. In July, ESMA warned that event contracts qualifying as financial instruments fall under European binary-options restrictions. Tiger Research says much of Asia still treats prediction markets as gambling, potentially missing out on capital and oversight.
Utah’s lawsuit now raises a bigger question: Can states regulate not just prediction exchanges, but also the firms that keep their markets running?
Don’t just read crypto news. Understand it. Subscribe to our newsletter. It's free.
FAQs
Who did Utah sue?
The state is seeking a court injunction to halt the markets, restitution, and disgorgement of fees it estimates at $30.6 million to $61.2 million collected from Utah residents.
What does Utah want from the case?
The state is seeking a court injunction to halt the markets, restitution, and disgorgement of fees it estimates at $30.6 million to $61.2 million collected from Utah residents.
How large is the prediction-market industry now?
Artemis data as of October 21 shows $394.2 billion in trailing-year trading volume across all prediction markets, with sports contracts making up $169.9 billion, or 43.1%; Kalshi accounts for $309.8 billion of that total.
Is a prediction market illegal gambling?
Not necessarily. The legal classification depends on the contract, the jurisdiction and the applicable financial-services and gambling laws. In the United States, Kalshi argues that its CFTC-regulated event contracts are derivatives, while Utah argues that its sports, political and other event contracts constitute unlawful gambling under state law. In the European Union and parts of Asia, some event contracts may also fall under gambling restrictions even when platforms describe them as financial products.
How are regulators outside the US treating prediction markets?
Regulators outside the United States generally assess prediction markets under existing financial-services and gambling frameworks rather than automatically treating them as federally regulated derivatives. In July 2026, the European Securities and Markets Authority (ESMA) reminded firms that certain binary-outcome event contracts may fall under restrictions on binary options and require investment-firm authorization. In Hong Kong, authorities have warned that some prediction-market activity may constitute illegal gambling or lack securities-law protections. The precise treatment varies by country and product.
Are prediction markets legal in the European Union?
There is no blanket authorization that makes every prediction market legal across the EU. Under ESMA's July 2026 guidance, event contracts that qualify as financial instruments may be subject to existing national restrictions on binary options offered to retail clients, as well as investment-firm authorization requirements. Contracts may also qualify as bets under individual member states' gambling laws. Their treatment therefore depends on the product and the country concerned.
Are prediction markets legal in Asia?
There is no single Asia-wide rule. Hong Kong authorities have warned that certain event-based contracts may qualify as financial products, while other offerings may constitute illegal gambling. Singapore also applies strict rules to unlicensed gambling, and access to some prediction-market platforms has been restricted. Users and operators must assess the applicable national laws rather than assume that a platform available in one market can legally operate throughout Asia.
Why is the CFTC involved in the Kalshi lawsuit?
The CFTC regulates specified futures and swaps markets under the Commodity Exchange Act. Kalshi argues that its event contracts fall within this federal derivatives framework, giving federal law priority over conflicting state restrictions. The CFTC has supported federal jurisdiction in related litigation, including through an amicus brief filed in the Sixth Circuit in May 2026. Utah disputes the application of that framework to the contracts at issue in its state.
Why is Utah suing Susquehanna-linked firms as well as Kalshi?
Utah's Oct. 20, 2026, complaint names Susquehanna International Group and Susquehanna Government Products alongside five Kalshi entities. The state is seeking to extend accountability beyond the platform itself to firms it alleges played a role in the market's trading operations. The firms' precise roles, defenses and potential liability should be described using the complaint and any subsequent responses, not inferred from their names alone.
Could the Kalshi lawsuit affect crypto trading platforms?
Potentially, but the effect would depend on the products and legal issues involved. Reuters reported on Oct. 20, 2026, that Webull plans to launch crypto-linked perpetual futures for US customers in November through a partnership with Kalshi. The Utah case could add scrutiny to the wider prediction-market ecosystem, but it does not by itself establish that Webull's planned offering is unlawful or that the lawsuit directly challenges it.
How much money does Utah claim Kalshi made from local users?
Utah estimates that Kalshi collected between $30.6 million and $61.2 million in fees associated with Utah accounts. The state also alleges that Utah residents lost approximately $5.5 million on individual wagers. These are figures cited in the state's allegations, not final judicial findings or confirmed amounts that Kalshi has been ordered to repay.
Disclaimer. The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decisions.
Micah Abiodun
Micah Abiodun makes good use of his Environmental Engineering and Management (MSc) at Tallinn University of Technology (TalTech) to polish content and price prediction news at Cryptopolitan. Now on his 7th year in the crypto media space, he covers major cryptos, altcoins, DeFi, stablecoins, macro trends, and emerging tech.
