The Commodity Futures Trading Commission (CFTC) filed a lawsuit against Utah on Tuesday over the state’s attempt to restrict prediction market platform Kalshi.
The case is the federal regulator’s 10th against a state that has sought to rein in prediction markets, and its first against a state led by a Republican governor.
The CFTC filed the complaint in the US District Court for the District of Utah, Central Division, and named the state and Attorney General Derek Brown as defendants. The agency alleges that Utah is intruding on its jurisdiction over prediction markets and cannot use state law to regulate Kalshi because the company is overseen exclusively at the federal level.
Utah targets Kalshi in state court
The federal action follows a lawsuit that Utah filed against Kalshi last week. The state alleges that the company is operating an illegal gambling business and describes the platform as a “public nuisance that is causing substantial ongoing harm” to its residents.
According to Utah, Kalshi is violating state gambling laws, including those that apply to betting on sports, elections and politics.
Kalshi rejects the charge. Company spokesperson Jacki McGavick said in a statement that Kalshi, as a federally regulated financial exchange, “answers to federal law, and no single state should have a veto over it.”
“Utah seeks to shut down prediction markets across a wide variety of markets,” said CFTC Chair Michael Selig in a statement. “Congress entrusted the CFTC to be the federal regulator with sole responsibility to oversee these markets. 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.”
Nine earlier lawsuits against states
Before Utah, the CFTC sued Arizona, Connecticut, Illinois, New York, Wisconsin, Minnesota, Rhode Island, New Mexico and Kentucky over what it says is interference with its “exclusive jurisdiction.”
Under the Trump administration, Selig has pursued the agency’s claim to oversight through both litigation and rulemaking.
The agency maintains that prediction market operators are federally regulated financial exchanges that fall solely under its supervision.
State officials, however, consider the platforms to be newer forms of gambling that belong under state oversight. States also argue that they hold jurisdiction over sports betting and that the platforms are operating illegally while avoiding taxes.
Earlier this year, Utah Gov. Spencer Cox (R) dismissed the idea that the CFTC should regulate the platforms and called it “a joke.”
The dispute over whether federal or state authorities should regulate prediction markets has moved among state courts and could reach the US Supreme Court, which is currently considering a request from New Jersey officials to take up the issue.