Susquehanna's market-making role draws state liability into Kalshi suit

Utah's Third District Court received a civil complaint on October 20 that named not just Kalshi but two Susquehanna trading firms as defendants — the first time a state has reached past the prediction market operator itself to the firms supplying its liquidity.

Attorney General Derek Brown is seeking up to $61.2 million, derived from what the state estimates as more than $3 billion in wagers placed by over 32,000 verified Utah accounts. The complaint also identifies $5.5 million in individual losses, requests geolocation restrictions, and alleges Kalshi began serving Utah residents in September 2024 with knowledge that the state's constitutional gambling prohibition left no room for the product.

Utah's constitution is categorical. No lotteries. No casinos. No sportsbooks. Brown's framing was equally categorical: "Utah has said no to gambling since statehood in 1896, and that didn't change when betting moved onto cellphones." The legal theory holds that Kalshi's event contracts — sports outcomes, elections, politics, culture — are functionally indistinguishable from proposition bets and parlays, regardless of what the CFTC's designation says about their regulatory classification.

Kalshi's response was the same it has given every state: federal jurisdiction controls, the Commodity Exchange Act governs, no single state holds veto power over a nationally regulated derivatives market. Spokesperson Jacki McGavick described Kalshi as operating like a stock market, where customers trade with each other and set prices. That framing has been consistent and, so far, unresolved by any court with authority to settle it permanently.

What is not consistent with prior state actions is the Susquehanna inclusion. The two affiliated trading firms became major Kalshi liquidity providers roughly two years ago and expanded that relationship in August through a block trading arrangement involving Cantor Fitzgerald. Utah is now arguing, in effect, that providing liquidity and pricing for contracts the state considers illegal wagers is itself a violation — that the market-making function is not insulated from the underlying liability.

I have seen this logic applied before, in a different context, against intermediaries who processed transactions a state later characterized as unlawful. The theory succeeded not because the intermediary knew the activity was prohibited, but because the state could demonstrate the intermediary profited from volume generated by prohibited activity. Knowledge was secondary. Economic entanglement was primary.

If that framing survives a motion to dismiss here, the Susquehanna defendants will face a discovery process that requires them to produce transaction records, pricing models, and internal communications about their Kalshi relationship. That exposure extends beyond this lawsuit. Any institution currently providing liquidity, clearing, or distribution services to prediction market operators will need to assess whether their contractual arrangements constitute economic entanglement under the law of whatever state decides to file next.

The enforceability of a CFTC-regulated exchange product against state gambling law has never been resolved at the level that would bind other courts. Until it is, each state that files is adding a defendant class, a damages theory, and a factual record that the next state can build on. Utah added market makers to that record.