The Commodity Futures Trading Commission (CFTC) announced Tuesday it has sued Utah to block the state from enforcing its gambling laws against federally regulated prediction markets.
- Utah is the 10th state that the CFTC has challenged in court.
- The CFTC chairman argues federal law gives the agency exclusive authority over the markets.
- Utah sued Kalshi on Oct. 20, six days before the federal lawsuit was filed.
Utah is the 10th state the CFTC has sued since April as the federal agency backs prediction market operators in disputes over its regulatory authority.
The CFTC argues that federal law gives it exclusive authority over certain contracts traded on federally registered exchanges. As such, Utah’s attempt to prohibit those contracts conflicts with federal law and is therefore preempted, the agency says.
“Utah seeks to shut down prediction markets across a wide variety of markets,” CFTC chairman Michael Selig said in a statement. “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
The CFTC’s latest legal action comes a week after Utah Attorney General Derek Brown filed a lawsuit against Kalshi, claiming the popular trading exchange is violating the state’s gambling laws.
“As I’ve said before, the CFTC has the expertise and responsibility to defend its exclusive jurisdiction over commodity derivatives, and that’s exactly what we’ll do,” Selig said.
Utah is one of just 11 states to not legalize sports betting, and there is no lottery there, either, so the state has fought to keep any form of gaming out of the jurisdiction. Kalshi initially sued Utah in February, seeking to prevent the state from enforcing its gambling laws against the exchange.
In August, a federal judge ruled that the Commodity Exchange Act did not preempt Utah’s gambling laws in Kalshi's case. Kalshi appealed and sought an injunction blocking enforcement while the appeal proceeded, but the Tenth Circuit denied that request in September. Utah filed its own lawsuit against Kalshi on Oct. 20.
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Battle rages on
The states versus prediction markets legal battle began last year after operators began offering sports event contracts on major sports, competing with regulated and taxed sportsbooks in 40 U.S. jurisdictions, including Washington, D.C. Nevada has been at the forefront of efforts to block prediction markets and won a federal appeals court ruling in August, giving other states a legal precedent to cite in their challenges against trading exchanges.
Meanwhile, the CFTC has supported prediction market operators in multiple ways. The CFTC first sued Arizona, Connecticut, and Illinois in April. It later filed lawsuits against Kentucky, Minnesota, New Mexico, New York, Rhode Island, and Wisconsin before bringing its case against Utah. The agency has also filed briefs in four federal courts of appeals and one state supreme court.
“The CFTC continues to draw a clear line: If a state challenges the lawful operation of a derivatives exchange, the Commission will protect federal sovereign interests,” the federal agency said.
