CFTC seeks emergency order to halt Utah’s Kalshi enforcement

The Commodity Futures Trading Commission and the U.S. government have asked a federal judge to immediately halt Utah’s criminal and civil enforcement actions involving Kalshi’s event contracts, escalating a dispute over whether federal commodities law overrides the state’s gambling restrictions.

Their Oct. 29 motion seeks a temporary restraining order and preliminary injunction in the U.S. District Court for the District of Utah. The requested order would prevent Utah from pursuing criminal or civil enforcement related to event contracts listed on CFTC-regulated designated contract markets, including pending cases against such markets, futures commission merchants and their officers.

As reported on Oct. 27, the federal government had already sued Utah and Attorney General Derek Brown, in his official capacity, arguing that the Commodity Exchange Act preempts the state’s gambling laws when applied to event contracts on federally regulated exchanges.

The proposed order says the federal plaintiffs are likely to succeed on that preemption claim and would suffer irreparable harm without relief. It says they have no adequate remedy at law and that the balance of equities favours an injunction.

The order would also stop Utah from opening further criminal or civil cases, issuing subpoenas or using other compulsory investigative processes involving the contracts. It would require the state to dismiss the covered actions or seek to stay them pending further direction from the court.

Kalshi is not a party to the federal government’s case, United States of America and Commodity Futures Trading Commission v. State of Utah and Derek Brown. But the motion attached Utah’s Oct. 20 civil complaint against the company and three criminal informations filed Oct. 28 against KalshiEX LLC and its co-founders, Tarek Mansour and Luana Lopes Lara.

The federal filing seeks a different outcome from the one Judge Robert J. Shelby reached in Kalshi’s own earlier preemption challenge. In August, Shelby found that the federal law cited by Kalshi did not preempt Utah’s ability to enforce its anti-gambling laws, granted summary judgment to state defendants and denied Kalshi’s request for a preliminary injunction.

Shelby has set an in-person status and scheduling conference on the federal complaint and emergency motion for Nov. 6 at 1 p.m. The government must serve Utah and Brown by 5 p.m. on Nov. 3 and file proof of service by 5 p.m. on Nov. 4.