CFTC sues Utah to stop prediction-market enforcement against Kalshi

The Commodity Futures Trading Commission and the United States have sued Utah and Attorney General Derek Brown, seeking to halt the state’s enforcement of gambling laws against federally regulated prediction-market exchanges. The 33-page complaint, filed Oct. 26 in the U.S. District Court for the District of Utah, asks for preliminary and permanent injunctions blocking Utah’s pending case against Kalshi and future state investigations or enforcement actions involving designated contract markets and related entities.

In case 2:26-cv-01055, the federal government argues that event contracts targeted by Utah are swaps under the Commodity Exchange Act and fall within the CFTC’s exclusive jurisdiction when traded on regulated exchanges. The complaint seeks a declaration that Utah’s gambling, election-betting and public-nuisance laws cannot be applied to transactions listed, offered or executed on those exchanges.

The agency invokes express, field and conflict pre-emption, arguing that state-by-state enforcement would subject markets to “the prospect of 50 regulators across the country.” It says it monitors thousands of self-certified event contracts and may order products removed if they fail federal requirements. The filing also says a proposed joint CFTC-Securities and Exchange Commission rule would independently support treating the disputed contracts as swaps if adopted, though the agency maintains existing law already does so.

The action directly challenges Utah’s Oct. 20 state-court lawsuit against Kalshi and Susquehanna trading firms, as we reported last week. Utah alleges that Kalshi offered unlawful gambling to residents on sports, elections, politics and other outcomes, and seeks restrictions, restitution, disgorgement of alleged profits and geolocation measures.

Utah estimated allegedly unlawful fees of between $30.6 million and $61.2 million through Oct. 19, based on more than three billion wagers associated with Utah accounts. Brown has called Kalshi an online casino, while Kalshi has maintained that its federally regulated exchange answers to federal law rather than a single state.

The CFTC said Utah was its 10th state pre-emption action, after disputes involving Arizona, Connecticut, Illinois, Kentucky, Minnesota, New Mexico, New York, Rhode Island and Wisconsin. The legal record is divided: the Third Circuit upheld an injunction shielding Kalshi’s sports contracts from New Jersey gambling enforcement, while Utah prevailed before U.S. District Judge Robert Shelby in August. Kalshi’s appeal of that ruling remains pending after the Tenth Circuit declined in September to block Utah enforcement during the appeal.