Kalshi dealt a setback in Utah as judge says gambling laws apply

• Kalshi has suffered another setback in Utah after a judge sided with the state and dismissed a lawsuit
• The lawsuit, filed in February, sought to stop the state from trying to regulate the prediction market platform as a gambling firm
• The argument has fallen flat, with the judge concluding that Kalshi has failed to meet the burden of proof

Kalshi is facing yet more challenges in the United States, with another federal judge, this time in Utah, ruling that the state’s gambling laws could be applied when it comes to prediction market platforms.

This is the latest such decision across the nation, with judges seeing merit in the arguments put forward by gaming regulators, attorneys general, and lawmakers.

Utah secures a win against Kalshi

US District Judge Robert J. Shelby disagreed with Kalshi’s familiar line of defense, arguing that federal oversight did not protect the company from state regulation, and certainly not in the case where gaming laws apply.

In a statement by the Utah Attorney General’s Office, the ruling was summarized as follows:

"Kalshi sued Utah in February. Kalshi argued that because it operates a federally registered exchange, Utah could not treat its sports bets as gambling. The court disagreed on every point."

Kalshi essentially argued that event contracts on sports are not the same as gambling, and that they were regulated by the Commodity Futures Trading Commission (CFTC), an argument that has been delivered in similar cases across the nation.

Judge Shelby has officially rejected Kalshi’s lawsuit that was originally filed in February and granted summary judgment to the state instead.

Utah Attorney General Derek Brown, in particular, welcomed the decision and argued that Kalshi’s strategy of relying on what he described as "clever branding" would shield it from Utah’s gaming laws.

"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," Brown added.

What this means is that Kalshi will face a real possibility of withdrawing from the state and stopping its event contracts, whether they concern sports or another event. It is not clear whether Utah will enforce the decision and how it would and whether Kalshi will pursue other avenues to protect its interests.

The governor and the AG speak in favor of the ruling

"State regulation of its gambling laws does not prevent the CFTC from serving the public interest in regulating derivatives markets, preventing price manipulation, ensuring financial integrity, protecting market participants, and promoting innovations," the judge argued, but specifically pointed out that Kalshi had failed to meet the burden of showing otherwise.

Utah Gov. Spencer Cox was also among the individuals to welcome this decision and what it meant for the state. Cox did not mince his words in classifying prediction markets as gambling, and argued that they cause "tremendous harm to countless American families."

Jacki McGavick, a Kalshi spokesperson, has disagreed with the verdict, however, arguing that "multiple courts" have already agreed that prediction markets are exclusively regulated by the federal government. The issue remains highly divisive, and it is expected that sooner or later, the argument will have to be taken and settled by the U.S. Supreme Court.

Image credit: Unspalsh.com