Utah secures victory in lawsuit over its prop betting law; prediction market plans to appeal

SALT LAKE CITY — The prediction market Kalshi said it plans to appeal a federal court ruling issued earlier this week that allows Utah to enforce its new law banning proposition betting.

U.S. District Judge Robert Shelby granted summary judgment in the case Tuesday, siding with Utah and ruling that a federal law regulating commodities trading doesn't override the state gambling ban. The ruling is a win for Utah's Legislature and Gov. Spencer Cox, who came out strongly in favor of regulating prediction markets following a recent surge in sports betting on the platforms.

"Prediction markets are gambling, full stop," Cox wrote on X in response to the ruling. "They are causing tremendous harm to countless American families. Today's ruling affirms that Utah's anti-gambling laws are an appropriate way to protect our citizens and are not preempted by federal law."

A spokeswoman for Kalshi said the company disagrees with the decision and would appeal.

"Multiple courts have already recognized that prediction markets fall under exclusive federal jurisdiction, and we will continue to defend that position," Jacki McGavick told KSL.

Kalshi filed a notice of appeal Wednesday with the U.S. Court of Appeals for the 10th Circuit, which is based in Denver.

Kalshi first sued several Utah officials in February, when lawmakers were still debating a bill clarifying that proposition betting — or placing bets on specific players or events during games — falls under the state Constitution's ban on gambling. The company, which allows users to buy so-called event contracts on future outcomes and win money for guessing correctly, asked the courts to stop Utah from enforcing that law, saying its prediction market platform is regulated by the federal Commodity Futures Trading Commission and not subject to state-level gaming restrictions.

"Plaintiff KalshiEX LLC believes the governor of Utah and the Attorney General's Office of Utah will imminently bring an enforcement action against Kalshi with the intent to prevent Kalshi from offering event contracts for trading on its federally regulated exchange," the company's lawsuit reads. "Defendants have repeatedly represented that they believe Kalshi is operating unlawfully under Utah anti-gambling laws."

Shelby disagreed, however, writing in his ruling that "enforcement of state gambling laws is not inconsistent with the CFTC's regulation and oversight of derivatives markets. Congress is aware that some states permit gambling while others do not, and the (Commodity Exchange Act) explicitly provides for state jurisdiction." He was referring to a 1936 law that was amended after the 2008 financial crisis to give the Commodity Futures Trading Commission authority to regulate more financial trading tools, including event contracts.

He also wrote that Kalshi had failed to prove that "it would be impossible to comply with both Utah anti-gambling law and the CEA."

Utah Attorney General Derek Brown celebrated the district court ruling in a statement Tuesday.

"You can't rebrand illegal gambling as a federal commodity, and today a federal judge agreed with us. Kalshi bet that clever branding would beat Utah law. Kalshi lost and Utah won," he said. "Utah's constitution bans gambling to protect Utah families, and my office will enforce that ban. Gambling is gambling no matter what any company calls it."

Several members of Utah's congressional delegation have also raised concerns about betting on prediction markets. Sen. John Curtis introduced a bill earlier this year in Congress that would prevent companies regulated by the Commodity Futures Trading Commission from offering contracts that resemble sports betting or "casino-style" games.

Another bill, introduced by Utah Rep. Blake Moore, would ban markets from offering trades based on the outcomes of wars, illegal activity, elections, government actions and sporting events. Betting on wars is hardly a hypothetical, after a U.S. special forces soldier involved in the operation to capture Venezuelan President Nicolás Maduro was charged in April with using classified information about the raid to win more than $400,000 in an online market.

Moore said he is also concerned with the potentially harmful impacts of having sports betting and other types of gambling so readily available, even in states with bans on gambling.

"I have four young boys, 13 and under," Moore told KSL in March. "I worry that they could potentially have a casino associated with their phone in their pocket, and that terrifies me."

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