The Commodity Futures Trading Commission wants a federal judge to bar Utah from treating CFTC-regulated prediction markets as illegal gambling, starting with the state’s week-old case against Kalshi.
The agency announced the suit Tuesday, making Utah the tenth state it has taken legal action against. Its complaint, filed Monday in federal court in Utah, lists the United States and the CFTC as plaintiffs and the State of Utah and Attorney General Derek Brown as defendants.
Its legal theory is preemption: the plaintiffs argue the Commodity Exchange Act overrides Utah’s gambling, election-betting and public nuisance laws whenever they reach event contracts on CFTC-registered exchanges. They want a declaratory judgment and an order, first preliminary and then permanent, stopping both the Kalshi action and any future enforcement or investigations aimed at federally regulated exchanges.
“Utah seeks to shut down prediction markets across a wide variety of markets,” CFTC Chairman Michael Selig said in the release, adding that “Congress entrusted the CFTC to be the federal regulator with sole responsibility to oversee these markets.”
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Utah’s Case Against Kalshi
On Oct. 20, Brown’s office sued Kalshi in the Third Judicial District Court in Salt Lake County, alleging that the platform lets residents bet on sports, elections and politics in violation of state law. The federal complaint says the state case also names two Susquehanna entities and seeks restitution, disgorgement and punitive damages, among other relief.
“Kalshi runs an online casino in Utah and calls it a prediction market,” Brown said at the time.
Utah isn’t starting from scratch. On Sept. 8 the Tenth Circuit refused Kalshi’s bid to pause enforcement while it appeals Judge Robert Shelby’s August ruling that federal commodities law doesn’t displace Utah’s gambling prohibition, according to the attorney general’s office. Kalshi brought that case in February.
Nine Other States
The release says the agency has “initiated legal proceedings against nine other states and has submitted briefs in four federal courts of appeal and one state supreme court.”
Courts have entered preliminary injunctions in the federal government’s favor in three of those states, Arizona, Illinois and Minnesota, according to the complaint. In May, the agency went after Minnesota over a law that would make running a prediction market a felony. The other six are Connecticut, Kentucky, New Mexico, New York, Rhode Island and Wisconsin. In Rhode Island, the CFTC moved to intervene in Kalshi’s case.
Platforms are also taking states to court on their own. Polymarket sued Ohio in federal court on Oct. 16, citing new CFTC rules.
Related Listen: Why Kalshi’s Rough Week Could Reach the Supreme Court: DEX in the City
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