CFTC Sues Utah to Stop Its Case Against Kalshi

The US Commodity Futures Trading Commission has sued the state of Utah to stop it treating federally regulated prediction markets as illegal gambling. The regulator, which oversees US futures and derivatives trading, announced the case on 27 October, a week after Utah’s attorney general sued the prediction market Kalshi in a state court.

The CFTC’s release says Utah’s effort “obstructs Congress’s decision to federally preempt state law”. The case has only just been filed. No judge has ruled on it, and Utah’s own lawsuit against Kalshi continues for now.

In brief

The CFTC and the US government filed a federal lawsuit on 26 October asking a court to declare Utah’s gambling laws preempted for trades on CFTC-regulated exchanges.
Utah sued Kalshi and the trading firm Susquehanna on 20 October, alleging that “billions of wagers” on the platform broke state gambling law.
The CFTC says it has taken action involving 10 states, but a federal judge in Utah ruled for the state against Kalshi on the same question in August.

What the CFTC is asking the court to do

The complaint, filed in the US District Court for the District of Utah, names the state and its attorney general, Derek Brown, in his official capacity. It brings a single claim under the Supremacy Clause of the US Constitution, the rule that valid federal law overrides conflicting state law.

The CFTC asks for a ruling that Utah’s laws are “preempted, unconstitutional, and invalid as applied to transactions listed, offered, or executed” on exchanges it regulates. It also wants an injunction stopping Utah from investigating those exchanges and their partners, or enforcing state law against them, while the case runs and afterwards. The US Justice Department’s Civil Division signed the filing alongside the CFTC’s lawyers.

The complaint argues that a preliminary injunction is urgent. It says Utah’s case against Kalshi “threatens to wipe out the operation of CFTC-regulated exchanges within the State” and that the state’s actions “inject uncertainty into federal derivatives markets”.

“Utah seeks to shut down prediction markets across a wide variety of markets,” said CFTC chairman Michael S. Selig. “Event contracts do not just serve hedging and investment purposes—they also provide the public with information about the outcome of future events. Congress entrusted the CFTC to be the federal regulator with sole responsibility to oversee these markets.”

Utah’s case against Kalshi

According to the CFTC’s filing, Utah’s attorney general filed a civil enforcement case in the Third Judicial District Court for Salt Lake County on 20 October. It targets several Kalshi companies and two Susquehanna International Group entities, which Utah describes as “market makers” placing bets on the platform.

The CFTC’s complaint quotes Utah as alleging that the defendants began offering gambling bets to Utah residents “by at least September 2024”, and that Kalshi’s online bets are “indistinguishable from the bets offered by a traditional sportsbook”. Utah’s claims cover “billions of wagers” since 2024. The state is asking for a ban on certain event contracts in Utah, along with restitution, damages and punitive damages. These are Utah’s allegations, and Kalshi has not been found liable for anything.

Announcing that case, Utah attorney general Derek Brown said: “Kalshi runs an online casino in Utah and calls it a prediction market. That violates Utah law.” He added: “For 130 years, Utah has been clear: gambling has no place here, and we will enforce our laws.”

Event contracts let people trade on yes-or-no outcomes such as an election result or a sports game. The CFTC argues they are “swaps”, a type of derivative, and that exchanges registered with it as designated contract markets fall under its “exclusive jurisdiction”. Kalshi has been registered as one since November 2020, the complaint says.

Why the CFTC is racing state courts

Utah is not an isolated fight. The release says the CFTC “has also initiated legal proceedings against nine other states and has submitted briefs in four federal courts of appeal and one state supreme court”. The complaint lists Arizona, Connecticut, Illinois, Kentucky, Minnesota, New Mexico, New York, Rhode Island and Wisconsin, and says federal judges have granted preliminary injunctions in its favour in Arizona, Illinois and Minnesota. It also points to a Third Circuit appeals court ruling for Kalshi earlier this year.

That record explains the speed. The CFTC filed in federal court just six days after Utah sued, asking for the state case to be halted before a state judge can rule on whether Kalshi’s contracts are gambling. Each early win strengthens its claim that a single federal regulator, not 50 states, decides what can be traded.

The regulator has also been shaping the rules it is asking courts to apply. On 19 October it issued an interim final rule saying that “casino-style gambling products, including sports-wagering contracts entered into on a sportsbook and casino games, are not swaps”, alongside a proposal to state outright that sports, political and cultural event contracts are swaps. In effect, the CFTC is trying to draw the line between betting and trading itself, leaving the sportsbook side to states.

The weak point is Utah itself. According to the state attorney general’s office, Kalshi sued Utah officials in February making much the same argument, and in August US District Judge Robert Shelby ruled for Utah, holding that federal law does not override the state’s gambling laws. The Tenth Circuit appeals court refused on 8 September to block enforcement while Kalshi appeals. The CFTC is now bringing the argument in its own name, in the same federal district, but it starts with a ruling against the position it is taking. TSN found no public response from Utah to the federal suit on 27 October.

Leagues, exchanges and the regulator on the same side

The lawsuit was announced a day after the CFTC signed an integrity pact with the NBA, which also named Kalshi and Polymarket as its preferred prediction market exchanges. The CFTC’s complaint cites that agreement, and similar ones with Major League Baseball and the National Hockey League, as evidence of its own oversight of sports contracts.

TSN has tracked the battle between Kalshi and Polymarket for users, and the CFTC’s wider rulemaking, including its Regulation CTX and CAM proposals. The agency’s courtroom record is not spotless: a federal judge this month refused to cancel its $5 million Gemini settlement even though both sides asked. The Utah case will show whether its preemption argument keeps winning.