Washington vs. Salt Lake City: CFTC Sues Utah Over Kalshi

The Commodity Futures Trading Commission has sued the state of Utah, blocking the state’s attempt to shut down the prediction market Kalshi. This move makes Utah the tenth state the federal agency has taken to court over disputes regarding the regulation of prediction markets.

Utah filed a lawsuit in state court last week. The state is seeking a judicial order to prevent Kalshi from offering bets on sports, elections, and political events. State officials argue that Kalshi’s product constitutes gambling, which is prohibited under Utah law.

Utah Attorney General Derek Brown, a Republican, stated that the company operates an online casino while labeling it a prediction market. Brown said, “That violates Utah law.” He noted that Utah is one of only two states where gambling is banned under the state constitution. Brown added, “For 130 years, Utah has been clear: gambling has no place here, and we will enforce our laws.”

The legal conflict has escalated over time. Kalshi previously filed a preemptive lawsuit in federal court to stop Utah from enforcing its gambling laws. Utah won that case. Now that the state is proceeding with its own enforcement action, it must also defend against the CFTC’s new suit.

The CFTC announced its action on Tuesday. The agency stated it is suing to block Utah from using state law to shut down CFTC-registered contract markets. The commission claimed that Utah’s civil enforcement actions interfere with the functioning of exchanges it has registered. The CFTC argued that federal law preempts state law in this area, granting the agency sole authority over such markets.

The outcome of this case could impact the wider prediction market industry. If Utah succeeds in blocking Kalshi, it may create similar problems for the company’s rival, Polymarket. It could also affect major sports betting sites like DraftKings and FanDuel.

DraftKings and FanDuel advertise availability in all US states. They use 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 Utah cannot target with state gambling laws.