CFTC and DOJ File Suit to Block Utah Enforcement Against Kalshi Prediction Markets

The CFTC and DOJ have sued Utah over its attempts to restrict prediction market operator Kalshi, arguing that the state's gambling laws interfere with federal authority over derivatives exchanges.

The 33-page complaint filed in federal court seeks to bar Utah Attorney General Derek Brown from applying state gambling restrictions, election betting prohibitions, or public nuisance laws to CFTC-registered exchanges. Officials contend these actions cause irreparable injury to federal sovereign interests and regulatory jurisdiction.

This marks the CFTC's 10th legal challenge against a state seeking to limit prediction markets and the first such suit against a Republican-led state. It follows Utah's Oct. 20 lawsuit against Kalshi and two Susquehanna trading firms.

Federal Arguments Against State Restrictions

The complaint asks the court to declare that Utah's statutes cannot apply to designated contract markets regulated by the CFTC. It seeks preliminary and permanent injunctive relief preventing the state from investigating or enforcing those laws against registered exchanges, affiliates, and partners.

Michael Selig, CFTC Chairman, said, "Utah seeks to shut down prediction markets across a wide variety of markets. As I’ve said before, the CFTC has the expertise and responsibility to defend its exclusive jurisdiction over commodity derivatives, and that’s exactly what we’ll do." The filing argues that state opt-outs would conflict with federal impartial access rules and expose exchanges to a patchwork of 50 regulators.

Utah prohibits all forms of gambling. Derek Brown stated, "Kalshi runs an online casino in Utah and calls it a prediction market. That violates Utah law." The state seeks to block contracts on sports, elections, politics, and culture for Utah residents via geolocation, plus restitution estimated at between $30.6 million and $61.2 million in fees collected from state accounts.

The suit references 19th-century state bans on futures trading and a 1905 opinion by Justice Oliver Wendell Holmes. It cites favorable rulings in other circuits while noting the same federal district previously ruled for Utah in related Kalshi litigation.

The Accelerating Push Toward Supreme Court Review

Similar CFTC suits are pending in nine other states, with preliminary injunctions granted in Arizona, Illinois, and Minnesota. Appeals courts have split: the Third Circuit sided with Kalshi in New Jersey, the Ninth ruled against it on sports contracts in Nevada, and the Sixth backed Ohio and Tennessee. New Jersey, Robinhood, Crypto.com, and Kalshi have filed Supreme Court petitions, with supporting briefs from 38 states, the NFL, the American Gaming Association, and 145 tribal organizations. Kalshi's response is due Nov. 9.

The CFTC is also advancing rules to classify event contracts on sports, politics, culture, and weather as swaps while excluding state-licensed sportsbooks from the swap definition. As reported by World Casino News, this litigation trajectory points to Supreme Court resolution on the boundaries of federal preemption under the Commodity Exchange Act.