CFTC Files Lawsuit Against Utah Over Prediction Markets

Update (Oct 27, 19:42 UTC): The federal commodities regulator filed its own lawsuit in response to Utah officials' enforcement action against Kalshi, alleging that state authorities are attempting to usurp federal authority over prediction markets.

The Commodity Futures Trading Commission and the U.S. government have filed a federal lawsuit against Utah, challenging the state's enforcement actions against prediction markets and bringing the agency's total state jurisdiction challenges to 10. Filed in the U.S. District Court for the District of Utah, the 33-page complaint names the state and Attorney General Derek Brown as defendants.

Federal Preemption Arguments

Federal lawyers are seeking preliminary and permanent injunctions to block state investigations and enforcement actions involving transactions on CFTC-regulated designated contract markets, known as DCMs. The requested protection extends to registered exchanges, their affiliates, and partners involved in covered transactions.

The lawsuit asserts a single claim under the Constitution's Supremacy Clause, arguing that the Commodity Exchange Act grants the agency exclusive authority over the targeted event contracts because the government classifies them as swaps traded on federally regulated exchanges. The plaintiffs seek a declaration that Utah's laws, including gambling statutes, election-betting prohibitions, and public-nuisance laws, are invalid as applied to these transactions.

Ongoing State Disputes

The federal action follows Utah's October state-court case against Kalshi businesses and Susquehanna trading firms, which seeks to recover fees estimated between $30.6 million and $61.2 million. In a separate federal proceeding, U.S. District Judge Robert Shelby granted summary judgment to Utah on August 4, concluding that the Commodity Exchange Act did not preempt enforcement of the state's anti-gambling laws against Kalshi.

The CFTC's complaint lists nine other states involved in earlier preemption actions: Arizona, Connecticut, Illinois, Kentucky, Minnesota, New Mexico, New York, Rhode Island, and Wisconsin.

Key facts

• The CFTC and U.S. government filed a 33-page lawsuit against Utah and Attorney General Derek Brown on October 26.
• The lawsuit seeks to block state enforcement against federally regulated event-contract markets and their partners.
• Utah previously secured an August 4 summary judgment ruling upholding its anti-gambling enforcement against Kalshi.
• The complaint identifies nine other states facing similar CFTC preemption actions.