Yesterday, the Utah Attorney General filed criminal charges against Kalshi, a prediction markets platform, alleging that the company illegally promoted gambling in the state. Unlike traditional casino gambling, where the house maintains a built-in statistical advantage, prediction markets match users who take opposing positions on the outcomes of future events. Kalshi generates its revenue through transaction fees, meaning that it has no stake in who wins or loses.
That distinction is precisely why prediction markets should not be regulated under traditional state gambling laws. Doing so conflates two fundamentally different business models and restricts individuals’ ability to participate in markets that harness the “wisdom of crowds” to aggregate collective wisdom and forecast future events.
Notably, the criminal charges are also being brought against Kalshi’s founders in their individual capacities. This is an aggressive approach that could expose them to prison time, despite the ongoing legal uncertainty over whether states have the authority to regulate activities already subject to federal oversight by the Commodity Futures Trading Commission.
Across the board, despite having high levels of freedom in many areas, Utah scores poorly on recreational freedom. The Cato Institute recently published an index of different freedom metrics for all 50 states. While the Beehive State scored seventh in the nation overall, it ranked second-to-last for “recreational freedom.” That score likely had to do with the state’s alcohol laws and constitutional gambling ban.
Utah has a troubling history of banning and restricting activities that many in the state consider to be immoral. In 2009, Utah adopted the so-called “Zion Curtain” requirement, which mandated that newly licensed restaurants conceal the preparation and dispensing of alcoholic beverages behind a physical opaque barrier, ostensibly to prevent children from witnessing alcohol being poured or mixed. It was not until 2017 that lawmakers relaxed the requirement, allowing restaurants to replace the barrier with alternatives, such as the “Zion Moat.”
Individuals should be free to decide how they conduct their own affairs, so long as they do not directly harm others, rather than having the government impose a particular set of moral beliefs on them. Prediction markets are clearly the next battleground in the debate over whether Utah will restrict personal freedom or allow individuals to make their own decisions.
The state should choose freedom. Prediction markets are not casinos. Regulating them as such sets a dangerous precedent, putting the state on a slippery slope toward overreaching control over what free individuals can do on their own devices.
