CFTC Files Federal Lawsuit to Halt Utah's Kalshi Ban

The Commodity Futures Trading Commission filed a federal lawsuit on Tuesday to stop Utah from enforcing its gambling ban against the prediction market Kalshi. The agency’s move makes Utah the tenth state subject to a CFTC challenge over the legal status of prediction markets. The commission seeks to block the state from using its own laws to shut down CFTC-registered contract markets.

Utah Attorney General Derek Brown initiated the state-level dispute last week by filing a lawsuit in state court. The state is seeking a judicial order barring Kalshi from offering wagers on sports, elections, and political events. Brown characterized the company’s operations as an online casino operating under a different name. He stated, “Kalshi runs an online casino in Utah and calls it a prediction market. That violates Utah law.”

Brown emphasized that Utah is one of only two states where gambling is prohibited under the state constitution. He noted that the state has maintained this legal stance for 130 years. “For 130 years, Utah has been clear: gambling has no place here, and we will enforce our laws,” Brown said. The state contends that Kalshi’s product falls squarely within the existing definition of prohibited gambling.

This litigation follows a previous legal exchange between the two parties. Kalshi previously filed a preemptive suit in federal court to stop Utah from enforcing its gambling statutes against the company. Utah won that case. Now that the state is pursuing its own enforcement action in state court, it must also defend against the CFTC’s new federal claim. The commission argues that its suit prevents state law from interfering with exchanges it has registered.

The CFTC asserts that federal law preempts state law in this specific area, granting the agency sole authority over such markets. The commission stated that Utah’s actions obstruct a decision made by Congress. The lawsuit targets the state’s decision to file civil enforcement actions against CFTC-regulated markets and other businesses in state court.

The legal outcome may affect the wider prediction market industry. A Utah victory against Kalshi could create complications for Polymarket, a chief rival in the sector. It could also impact sports betting platforms like DraftKings and FanDuel. These operators advertise availability in all US states and utilize a mix of products, including prediction market platforms in states like Utah. Both companies are registered with the CFTC, placing them in the same category of federally regulated operators that the agency says states cannot target with gambling laws.