Utah Governor Spencer Cox has declared that prediction market applications like Kalshi are “illegal” within the state, prompting a legal showdown as Kalshi has taken the initiative to file a lawsuit against Cox and other state officials. This move comes after Cox indicated that he would take action against these apps, claiming they contribute to gambling-related issues in Utah.
The suit, filed in U.S. District Court on Monday, seeks an injunction to block the state from regulating Kalshi’s operations, arguing that its business model does not fall under state jurisdiction. Kalshi contends that it recently reached out to Utah authorities for clarification on their stance but received no response. The company expressed concern over impending legal action from officials who have publicly criticized its activities.
Kalshi, which focuses on trading future outcomes across various categories, is referencing a recent win in Tennessee where it successfully secured a similar injunction. In New Jersey last year, a court ruled that only the federal Commodity Futures Trading Commission (CFTC) holds authority over the contracts offered by such prediction markets.
The battle escalated when Cox and Utah Attorney General Derek Brown publicly condemned prediction markets like Kalshi, stating they undermine gambling regulations and pose risks to citizens, particularly younger individuals. Brown has previously stated that he is keen on preventing what he views as an incursion of illegal gambling operations that target vulnerable demographics.
Cox and Brown’s remarks echo a mounting tension around the regulation of prediction markets. Chairman of the CFTC, Mike Selig, recently emphasized the federal agency’s authority over such platforms, which he argues enable speculation without ownership of the underlying assets. However, Cox countered Selig’s defense, remarking on social media that he sees these markets, including predictions on sports outcomes, as fundamentally gambling and detrimental to families.
As a response to growing concerns, Utah legislators are also pushing forward a bill that would redefine gambling laws in the state, aiming to further regulate proposition betting to safeguard residents.
Kalshi’s legal action is part of a wider national conversation regarding the regulation of prediction markets, with similar lawsuits emerging across various states. Courts in Nevada and New Jersey have sided with Kalshi’s position on federal oversight, while Maryland courts have ruled differently, allowing for state-level regulation.
This evolving legal landscape underscores the complexities of regulating virtual prediction markets and the balance between state interests and federal authority, highlighting an ongoing and significant debate in American gambling law. With both sides preparing for a potential court battle, the outcome could have lasting implications for how prediction markets operate across the United States.