CFTC sues Utah to block prediction market enforcement

The Commodity Futures Trading Commission and the United States have sued Utah and Attorney General Derek Brown, seeking to stop the state from enforcing gambling laws against event contracts traded on federally regulated exchanges. The federal complaint, filed October 26, escalates a dispute over whether prediction markets fall under federal financial oversight or state gambling restrictions.

The lawsuit follows Utah’s October 20 civil action against Kalshi and related businesses. State officials allege the platform offers illegal gambling disguised as financial contracts and are seeking an injunction, restitution and the recovery of money collected from Utah residents. Those allegations remain contested.

Federal lawyers argue that the Commodity Exchange Act gives the CFTC exclusive authority over swaps traded on designated contract markets. Their complaint maintains that Utah’s enforcement efforts conflict with that federal framework and invokes the Constitution’s Supremacy Clause, which establishes the priority of federal law when applicable state laws conflict with it.

The government is asking for a declaration supporting its jurisdiction and preliminary and permanent injunctions against state enforcement. Its requested restrictions extend to investigations and enforcement involving regulated entities, their affiliates and partners over covered transactions. Filing the complaint does not itself block Utah’s actions or establish that the federal argument will prevail.

Utah takes a fundamentally different view of the underlying activity. Its attorney general’s office says Kalshi’s event contracts amount to gambling prohibited under state law, regardless of the platform’s federal registration. The state’s lawsuit seeks to stop the company from offering those contracts to Utah residents and obtain compensation for alleged harm.

The financial claims are substantial but remain estimates presented by the state. Utah alleges Kalshi collected between $30.6 million and $61.2 million in fees from Utah customers, alongside a separate claim concerning approximately $5.5 million in gambling profits. Those figures are not court-awarded damages or findings establishing liability.

Kalshi maintains that it operates a federally regulated exchange where customers trade contracts with one another, rather than bet against a traditional sportsbook. The company argues that federal supervision prevents individual states from vetoing its markets. Utah disputes that federal registration shields the challenged contracts from its gambling prohibitions.

The new federal action also follows an earlier case brought by Kalshi against Utah officials. In August, a federal judge ruled in the state’s favor, rejecting Kalshi’s argument that federal commodities law prevented enforcement of Utah’s restrictions on its sports contracts. Kalshi appealed, and the Tenth Circuit subsequently declined its emergency request for an injunction while the appeal proceeded.

The overlapping cases put both market access and regulatory authority before the courts. The federal government is seeking protection for transactions on CFTC-regulated exchanges, while Utah is pursuing its state-law remedies against Kalshi. The next consequential question is whether the court grants interim relief limiting enforcement before resolving the broader jurisdictional dispute.