Last week, Utah sued the online prediction market Kalshi, alleging the platform violated the state’s anti-gambling laws. On Tuesday, the federal Commodity Futures Trading Commission sued Utah to stop the state from enforcing its anti-gambling laws against those markets.
The CFTC’s complaint, which names Attorney General Derek Brown and the state, argues that Congress gave the agency exclusive oversight of these markets. That means Utah can’t prohibit companies that operate under the CFTC’s rules, the complaint says. The agency wants the court to declare that Utah’s anti-gambling laws can’t be applied to transactions the CFTC regulates.
Kalshi and other prediction markets let users buy and sell yes-or-no contracts tied to real-world events, such as a football game or an election. Users trade with one another, not against a sportsbook.
Utah says those trades are illegal gambling. The CFTC says they’re federally regulated financial transactions, and a state can’t shut them down by calling them something else.
The agency’s argument rests on the Commodity Exchange Act. A contract that pays out if something happens, such as a team winning, counts as a “swap” under the law, the complaint says, and Congress gave the CFTC exclusive authority over swaps.
The CFTC acknowledges that an event contract and a sportsbook bet can look alike, since someone can win or lose money on the same game. But the products are different, it argues, because prediction markets operate under a separate federal framework.
Letting each state set its own restrictions would undermine that system, the agency says, and Utah’s laws conflict with federal requirements.
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A spokesperson for the Utah Attorney General’s Office declined to comment.
Tuesday’s lawsuit is the latest salvo in a legal fight that has been building for months. Kalshi sued Utah in February to head off enforcement, arguing that the CFTC regulates its operations exclusively. In August, a federal judge ruled that the Commodity Exchange Act doesn’t bar Utah from enforcing its gambling laws. Kalshi appealed to the 10th U.S. Circuit Court of Appeals in Denver and asked for an injunction to keep Utah from enforcing the laws during the appeal. That request was denied, and Brown filed his lawsuit last week.
