A new front opened Tuesday in Utah’s battle against prediction markets when the Commodity Futures Trading Commission filed a lawsuit Tuesday to stop the state from shutting down federally regulated markets.
Utah sued prediction market platform Kalshi on Oct. 20 on the basis that the state constitution prohibits gambling.
On this episode of “Deseret Voices,” Utah Attorney General Derek Brown joins McKay Coppins to state his case.
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Note: Transcript edited by Steven Watkins.
McKay Coppins: Attorney General Brown, thank you for coming on “Deseret Voices.”
Derek Brown: Thanks, McKay. Great to be here with you.
MC: Why don’t we just start with the basics here? And I want you to explain why Utah is suing Kalshi. What is the case that you are making against this company?
DB: Well, first of all, let’s just start with the law. We’re unique in that there are only two states in the country where the state constitution literally prohibits gambling. The law is what it is. We’re on the same side, ironically — Utah’s on the same side as Nevada. And when Utah and Nevada are agreeing on an issue involving gambling, you know it’s not about morality. It’s about control. And so ultimately, that’s what this lawsuit is about. It’s basically saying, look, we have a law. The law is very clear. You are breaking the law. And not just breaking it, but knowingly breaking it. We literally have a lawsuit that they filed against the state of Utah six or seven months ago, and they lost, and they’re still doing it.
MC: So, help me understand. Utah, given its famous anti-gambling credentials that you just laid out there — it’s literally in the state constitution — how is it possible that somebody in Utah right now could pull out their phone, open Kalshi and start betting on a football game? Why is that the case?
DB: They’ve chosen — I think what they’ve chosen is they’ve made a bet. They’ve bet that, as a state, we’re not going to enforce our laws. And it’s not for lack of having the technology to, you know, geofence in Utah. I mean, these sportsbooks have been doing it in places like Nevada for a long time. They know how to do it. They’ve just simply made a decision — it’s a business decision, and it’s based on money. And the reality is, they’re hoping that we’re not going to pursue charges.
MC: So what Kalshi says is that it is not a sportsbook or a gambling platform; it is a federally regulated financial exchange, like a commodities market. What do you say to that distinction?
DB: Well, first of all, I think it’s a distinction without a difference. And, you know, a lot of this came about — frankly, it was the morning of the Super Bowl. I’m sitting next to my son, who is a student at BYU. He shows me this ad he had just got on Instagram, and it was a Kalshi ad that basically said, you know, “Legal in all 50 states,” and effectively said, look, you know, while you can’t bet on the Seahawks winning the Super Bowl, you can trade on a future outcome in which the Seahawks win the Super Bowl. And to me, that’s a distinction without a difference. And what’s funny is I’ve actually talked a lot — I’ve given speeches, I’ve talked to I can’t tell you how many parents, and whenever I mention that distinction, literally the room erupts in laughter.
So, I mean, McKay, this doesn’t pass the sniff test. I mean, like, or the smell test — it really doesn’t. Everybody that you — I mean, ask anybody if there’s really a distinction, and they’ll all just laugh at you. I actually did an op-ed in the Deseret News, and I ended the op-ed — I was kind of being cheeky, but I said, look, you know, I’m being asked, am I going to do something, what am I going to do, am I going to do anything about this online gambling proliferation, and I just said, you know, “My response? You can bet on it.”
And it was the next day that Kalshi sued me and the governor and others. And we argued this in the Federal District Court in Utah, and the state of Utah won. I mean, we won, and they dismissed the case. We’re actually, in all the states in America, we’re the first state where the judge has literally just granted summary judgment and dismissed the case. So, Utah’s pretty unique in that sense.
MC: Well, I mean, that was actually going to be one of my questions. This federal judge ruled in Utah’s favor in August. Why hasn’t that stopped the company? Why is Kalshi still accessible in the state of Utah?
DB: That is the $60,000 question, and that’s a question you’d have to ask them. Because it’s pretty brazen and pretty unique for a company to literally have a federal court say what you’re doing can’t be done, and they still do it anyway. So that is the answer to your earlier question of why this lawsuit against Kalshi.
MC: You know, you talked about the kind of brazenness of these companies. There’s one intriguing detail in the complaint about someone associated with Kalshi allegedly entering BYU’s private campus without permission to shoot an advertisement. I have to say, I actually have a memory of just as a man on the internet who has social media, seeing ads for Kalshi and thinking, that looks a lot like — is that the Wilkinson Center? Or is that, you know, is that the BYU campus? And thinking, there’s no way that they’re filming ads for Kalshi on BYU’s campus. But what can you tell me about that?
DB: Well, what’s funny is that was sent to me by by a friend who said, “Hey, this those mountains in the background look really familiar in this Kalshi ad.” So I did what any smart father would do. I sent it to my two boys, one of whom is at BYU and one just graduated, and I said, “Hey, guys, I’m pretty sure this is literally — is this like in Provo? Where is this?” And they start looking at the background, and they start — and about 20 minutes later, they both text me, they’re like, “Dad, this was literally filmed sitting at the new BYU Creamery on 9th East.” Like, literally on BYU property. And I’m like, “Are you sure?” And they show me the background, and they said, here’s, you know, they showed me some Google Street Views, and sure enough, I mean, it was literally filmed on BYU property. So, you talk about brazen, you know, it really is, to go to private property of a university and film something like that.
MC: You were talking about how, in your mind, the distinction between a prediction market and a betting platform is laughable, and I tend to share your skepticism about the distinction. Though I will say that one meaningful distinction that does exist is that when you’re on an app like FanDuel or DraftKings, you are gambling against the house, a casino, right, a sportsbook that is setting the betting lines, setting the odds, and you are gambling against them. On the prediction markets, you’re gambling against other people, right? There is no house there to take advantage of you.
One of the more interesting allegations in Utah’s complaint, though, has to do with who’s on the other side of these bets. You argue that sophisticated institutional trading firms are effectively playing the role of the house casino. Can you explain how that works? Who’s actually profiting when an ordinary Utahn loses a bet?
DB: Well, if you look at the complaint, it looks like — you’ve seen the different entities. A lot of them are Kalshi or Kalshi-related entities. Two of them go by the name of Susquehanna. And those are what we call the market makers. And they’re the ones who, even though they say, look, it’s just wagering against somebody else, and then they’re taking a cut, you know, they’re just taking their fee, their vig, whatever they want to call it, you know, there’s no house. The reality is, you know, they’re basically saying, “Hey, you’ve got these poker players around a table playing against each other.” Well, but one of those poker players might be an expert who is invited by the casino to sit there at the poker table with you. And if he wins, the casino wins. I think that’s what’s going on here.
MC: I mean, that’s kind of amazing, and I don’t think the typical user of Kalshi understands that. That you’re not just taking positions, betting against some other schmo in a, you know, in another state. Kalshi is, according to your complaint, if I understand it correctly, tilting the game pretty heavily toward them. Is that right?
DB: Well, and they’re profiting, and so I think that’s ultimately what we’re saying is they’re not being 100% accurate in terms of that distinction. And the reality is these are things we’re going to find out in discovery. In fact, I’ve been asked, how do we know that there are roughly 32,000 verified Kalshi accounts in Utah? Well, we found that out when they sued us and we had their statements. So we, like, we are beginning to know details that will help us kind of get a sense of the magnitude of the issue. I mean, I was also asked, how do you know — I mean, we threw out some numbers based on what we think they may have made in the state of Utah, and it was a range of $30 to $60 million. It may be more. I mean, the reality is we don’t know, but we’ll find that out during the course of the lawsuit. But that is the details of this that you’re sort of getting into. We’re going to find out — we’re going to find out more about this.
MC: I do want to play devil’s advocate for one minute here, because Kalshi argues that these are, you know, legitimate financial exchanges, there are legitimate economic uses for these markets beyond gambling. And I suspect that there are at least a few people watching or listening to this interview who are pulling their hair out because they are convinced that they are using prediction markets as, you know, savvy and reasonable and respectable investors.
You know, there was one recent story that I thought was kind of interesting about a Los Angeles hospitality group — I don’t know if you saw this. They operate 25 bars, several of them are near Dodger Stadium, and they used Kalshi to place a $60,000 bet that would pay out if the Dodgers failed to make the World Series. And so when that happened, the position paid nearly double their initial stake, and it helped offset the business they lost because there wouldn’t continue to be fans coming to the bars around the stadium. So, you know, you could look at a story like that and say, isn’t that a legitimate use of a prediction market to hedge against financial risk? What what do you say to that?
DB: Well, and I think that ultimately the Commodities Exchange Act was specifically that. I mean, that’s what commodities traders did, is that they would hedge their bets on certain things. And so there’s obviously a market for commodities, and the CFTC regulates that. And ultimately, what I decided to do here, rather than get into those nuances, we were pretty specific about the kinds of things that are being addressed. So our lawsuit talks about politics and culture and mentions bets, the kinds of things where I think the reality is if you’re trying to make the argument about, “Hey, we’re just using this as a hedge from an economic standpoint,” we’re not really talking about those.
And ultimately, if you look at the overall portfolio, I mean, it’s 85% to 90% of the bets that are placed on places like Kalshi or Polymarket or others — I mean, for the most part, those are effectively sports. I mean, it just comes down to sports betting.
MC: Yeah, I think for all the prediction markets’ arguments about financial exchange and “look at all these things that you can take positions on,” it’s all kind of a song and dance to conceal the fact that it’s almost all of their consumers, their customers are just using the platforms to bet on sports, right?
DB: Well, and what I would say is look at the advertisements. I mean, I’m getting ads, my kids are getting ads, this last weekend, funny enough, my mother, who’s in her 80s, is getting ads from Kalshi. And all of them — I mean, all the ads are about sports. Like, they’re not saying, “Hey, you can make lots of money betting on the weather,” or “betting on the 2026 election,” or “betting on, you know, if somebody mentions ‘tush push.’” I mean, like, the ads are all sports-focused, right? So, I mean, that should tell you something, you know, in terms of putting their money where their mouth is.
MC: Some of the kinds of bets that you can make on these platforms — you list some of them in the complaint — are almost like comically silly, you know. You can bet on whether Donald Trump will say a certain word in an upcoming announcement, or whether someone will say “tush push” during a football game broadcast. And I’ve been speaking on college campuses about gambling and prediction markets this fall, and I’ve heard from a lot of young women on campus that they say these prediction markets are now targeting them pretty aggressively with bets on things like “Love Island,” the reality show, or, you know, “Dancing with the Stars” or whatever. Why do you think these markets have proliferated so rapidly, and do you think that there’s any way to stop their growing popularity?
DB: That’s what we’re hoping to do, is to slow down the growth of this industry. And one of my greatest frustrations — it’s funny, because when you campaign for office, you think that there will be certain things that are priorities in your brain, and then you get in office and all of a sudden they start changing. And I’ll tell you, the thing that has changed for me is looking at the number of businesses that are effectively making money off of the fact that kids don’t have the ability to control themselves. This is no different than what the nicotine, you know, manufacturers, tobacco companies, did in the ’90s. They knew what they were doing. They were marketing to kids. And they knew that if they could get a kid who is 13 or 14 or 15 to smoke, they had a customer for life. So that’s what’s going on here.
This is part of a bigger problem, right? I mean, we have a lot of companies out there that are literally profiting off of an individual’s inability to say no. And I think it’s, frankly, it’s immoral. I mean, this is not a new vice, right? It’s the same old vice dressed up with new language. I mean, there’s a reason that we have confined, you know, gambling to the deserts of Nevada for generations, because there’s friction. You’ve got to go there. You’ve got to go into a casino, which of course is specifically designed to make it so that you never want to leave.
Now, you know, the casino follows our kids at home, and it keeps them up at night, and it gives them notifications all day long. In fact, I talked to one teacher who was not happy because a lot of students in her class — well, they were complaining about the lack of phones, and now they have to turn their phones in before class, which made it so they were not able to monitor their trades during class. And if something happened on one of their, you know, Kalshi trades, then, you know, there was nothing they could do about it, because they didn’t have their phones. So, I mean, this has gotten, I think, just really out of hand.
MC: I want to ask about the way that these prediction markets have kind of worked Washington. They’ve spent a lot of money lobbying officials in the U.S. As you mentioned, the CFTC has taken the position that these markets are legitimate financial exchanges to be regulated federally. Donald Trump Jr., the president’s son, joined Kalshi as a strategic adviser early last year. The Trump administration’s regulators have taken an expansive view of the company’s legal rights. Do you worry that Kalshi’s political influence in Washington is making it harder for Utah and states like it to enforce their own laws?
DB: Well, I’m sure it has, like, without doubt, an impact, in part because when Congress really wants to do something, by and large they can do it. And this is an issue where we’ve seen Republicans talking about how we need to fix this. And I’ve seen on the other side of the aisle — I saw tweets by AOC, you know, all of whom are basically saying the same thing. Like, “Hey, this is a problem. We need to do something about this. There’s a lot of money in this industry, we know, but we’ve got to fix it.” They really could do something, like, and they could do it tomorrow. They’re not doing it.
You know, it took Congress 40 years to have a hearing on nicotine and nicotine addiction, and of course they didn’t really do anything. Congress talked for years about social media, and they haven’t done anything. And in fact, they’re talking about AI now, and they haven’t done anything. Congress doesn’t, like, do stuff. They don’t pass bills. They’re really dysfunctional.
That’s why — I mean, I get asked all the time, why are you doing this as attorney general? Well, these are the kind of issues where Republican and Democrat, red and blue A.G.s come together, and we look at, look, how is this impacting our youth? How is this impacting people in our state? And, you know, to some degree, this could be solved by Congress, but none of us are holding our breath on that issue.
MC: I have been encouraged by the inherently nonpartisan or bipartisan nature of the concern here. I mean, after I wrote a big story for The Atlantic earlier this year, I heard from members of Congress, state legislators from the far left to the far right who were reaching out asking for more information, asking what I knew about, you know, regulation and successful legislative attempts in various states. It is clear to me that there is bipartisan energy around this, but to your point, is it an issue that is pressing enough and urgent enough to break the kind of multi-decade dysfunction that has paralyzed Congress? I don’t know. I hope so.
DB: I don’t either, and I’ve had a lot of people that have said, “Well, you’re trying to be the …” — you know, one person called me a hall monitor — and, you know, “the morality police.” And some have suggested that maybe there was some sort of interface with the LDS Church after President Christofferson’s talk, which I think is funny, because anybody who knows anything about the law and what we’re doing sees, you know, we didn’t whip out a 63-page complaint against Kalshi overnight. We’ve been working on this for a very, very long time.
But this is fundamentally — I mean, morality aside, this is about control. This is about federalism. This is about the ability of states to say, look, you know, we we get to control things that involve health and safety of our citizens.
I’m on the phone all the time with my friends who are A.G.s who are Democrats, talking about these issues, because the reality is there’s some issues we’re just not going to agree on, you know, no surprise there, but there’s a lot of issues that we do agree on, and when it comes to protecting kids, this is one of those. And so that’s why you’ll see — I mean, that’s why A.G.s are acting in this space, and so I think you’ll continue to see action here.
MC: You mentioned the estimated $30 to $60 million in fees from Utah users alone, which is a large number. You said that you’ll figure out what the actual exact number is as you move forward in the lawsuit and discovery. If you win, though, and Kalshi is ordered to surrender the money it earned from Utah residents, where does that money actually go? Can it be returned to the Utahns who lost the money, or is it going into some pot that’s going to be used for something else? Do you have a sense of what happens to that money?
DB: You know, it’s hard to know, and what’s funny is that is exactly the conversation I’m currently having with most of our state legislators in Utah about the money that Meta is going to pay us as a state. And with that money, it’s going to be, how do we remediate the mental health problems that social media addiction has caused?
So anytime as a group of A.G.s we have gotten money from a legal settlement, like with nicotine — you know, it was a $206 billion settlement in the ’90s — we’ve been using that to address that issue. We’ve got settlements from opioids, you know, we have been working with the counties to make sure that the money from that addresses that. So I don’t have any specifics, but I think, you know, you’re spot on in terms of identifying that these are resources that hopefully would be put to addressing, you know, the reason that we have these lawsuits in the first place.
MC: Yeah, I’ll just say that when I talk to people who work in gambling addiction as a field, they say over and over again that it is a woefully underfunded, under-resourced area, especially given how many gambling addicts are being created in this new online gambling era.
DB: Well, and it is growing in a way that I don’t think people realize. And in fact, just the other day, I talked to somebody new in my religious congregation, and I was talking with him about, you know, what he does, and he said, “Well, my practice is, you know, gambling recovery.” I’m like, “Well, what part of your — like, how much of your practice are people who are addicted?” He said, “The entire thing. That is what I do. That’s all I do is talk with primarily men, young men, people who are addicted and can’t stop.”
And so I think we’re going to see more of this, and frankly, if you look at searches online for gambling help, and and just some of those metrics like that, you’ll see that it has gone up. I mean, any state when they legalize it, it starts to go up. Any country, I mean, you’re going to have these problems.
And it’s not — and what I was trying to say in my press conference the other day is those who are caught in it, it’s not because they’re weak or don’t have self-control. I mean, this has been a problem for centuries. I mean, my most — I mean, one of the most famous gamblers in my mind was the writer, you know, Dostoevsky, who was strong, and, you know, a strong person who survived the Gulag, and he’s brilliant and perceptive, and he literally is powerless in front of a roulette wheel. He, like, gambles his life away in front of a roulette wheel, a wheel who, like, who didn’t know his name.
I mean, like, now translate that into devices where they are specifically engineered, and they not only know these kids, they know them better than they know themselves. So, I mean, like, it’s not a fair fight, is I guess what I’m saying. It’s not a fair fight. So my message to them is, look, if you’re caught in this, you’re not weak, you’re not bad, you’re not wrong. You just need help, and help is available. So that has been my message on this issue to to those who are in it.
And to the companies who are doing it, you know, as I said the other day, like, be on notice. You know, Kalshi is the first, but there are many others that are out there that are doing it. And whatever else we’re doing, I obviously I can’t talk about, but the reality is, you know, they’re big, but there’s others out there as well.
MC: Attorney General Brown, thank you for coming on. And we’ll be tracking this story closely in the coming months. I hope you’ll come back on.
DB: Happy to do it. Thanks, McKay, appreciate it.