A federal judge has ruled that a license from Washington does not put a prediction market above Utah law. Kalshi sells contracts that pay out if customers correctly predict outcomes such as sporting events or elections, arguing they are federally regulated financial products. Utah says they are gambling. The court sided with Utah.
U.S. District Judge Robert J. Shelby granted summary judgment to the state Tuesday, rejecting the lawsuit Kalshi filed against Utah in February and ordering the case closed. Shelby found that federal commodities law does not override Utah’s anti-gambling statutes, writing that enforcing state gambling laws does not interfere with the Commodity Futures Trading Commission’s authority to regulate derivatives, prevent market manipulation or protect traders.
The dispute began after Utah lawmakers passed HB243, defining proposition betting as gambling. Proposition bets involve predicting specific events within a game—such as which player scores first or whether a team leads at halftime—rather than simply picking the winner. Kalshi sued before the bill became law, arguing its event contracts are federally regulated derivatives under the Commodity Exchange Act and therefore fall exclusively under CFTC oversight.
New York-based Kalshi operates a marketplace where users buy and sell contracts tied to future events. Those contracts clear through a CFTC-registered exchange, which has been central to the company’s argument that its business falls under federal financial regulation rather than state gambling laws.
Utah Attorney General Derek Brown said the state is now evaluating its next steps.
“At this point of the game, we’re simply looking at what our options are and I would say that everything’s on the table.”
Brown told FOX 13 News that Utah intends to enforce state law against Kalshi while determining the most appropriate path forward. For now, Utah residents can still access the platforms, though Brown acknowledged the dispute could ultimately reach the U.S. Supreme Court.
Kalshi said it disagrees with the ruling and plans to appeal, maintaining that prediction markets are regulated by the federal government rather than a patchwork of state gambling laws. The broader legal battle remains unsettled as courts across the country continue to issue conflicting rulings over whether prediction markets are financial products or sports betting in another form.
The scoreboard nationally remains divided. Courts in Maryland, Nevada, Ohio, New York and Wisconsin have ruled against Kalshi in similar disputes, while judges elsewhere have temporarily blocked state enforcement efforts. Kentucky’s attorney general has separately sued Kalshi, Polymarket and distribution partners Coinbase, Robinhood and Webull, alleging they operate unlicensed sports betting businesses outside state consumer protections and gaming tax laws.
Utah also received support from an unexpected ally. The American Gaming Association, representing the licensed casino and sportsbook industry, backed the state’s position despite Utah prohibiting all forms of legal gambling. The association argues prediction markets divert billions of dollars in wagering from regulated sportsbooks while avoiding licensing requirements, consumer safeguards and state tax obligations.
The financial stakes are enormous. Prediction market trading volume reached a record $50.59 billion in July, with Kalshi accounting for roughly 74.5% of that activity. The company raised $1 billion in May at a $22 billion valuation, and reports later indicated it was exploring another funding round that could value the company near $40 billion.
Utah itself represents only a small market because the state has never legalized gambling. But the ruling carries significance far beyond its borders. It gives other state attorneys general a detailed federal court opinion supporting their argument that a federal exchange license does not automatically preempt state gambling laws. If appellate courts ultimately agree, Kalshi’s business could become increasingly dependent on individual state approvals, reshaping both its national expansion strategy and the valuation investors are willing to assign to the company.
JBizNews Desk | Salt Lake City
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