U.S. agency hits Utah with lawsuit to shield Kalshi's ability to offer betting there

The U.S. Commodity Futures Trading Commission (CFTC) has initiated a lawsuit against Utah. This legal action aims to protect the CFTC's perceived sole authority over prediction markets, extending its efforts against states.

The federal agency, which oversees derivatives, filed a challenge to halt Utah's attempt to restrict prediction market betting within the state, where gambling is constitutionally banned. The CFTC is asking the court to stop an enforcement effort by Utah's attorney general from last week that sought to limit Kalshi's offerings to residents.

CFTC Chairman Mike Selig stated in a release that "Event contracts do not just serve hedging and investment purposes — they also provide the public with information about the outcome of future events." This statement further defended what he views as his agency's role as the sole regulator of prediction markets.

The dispute involves conflicting rulings from various courts regarding state legal rights versus federal preemption, with Kalshi and other prediction market firms favoring the latter. In Utah, a U.S. district court judge ruled in favor of the state in a case that is currently under appeal.

Utah's Attorney General Derek Brown asserted last week that "Anyone offering gambling to Utahns is on notice that it is illegal in Utah and that no Utah law authorizes it," accusing Kalshi of operating an online casino.

The CFTC is currently engaged in legal battles with 10 states. The new federal complaint argues that the Commodity Exchange Act grants the CFTC exclusive authority over the event contracts targeted by Utah, considering them swaps traded on federally regulated exchanges.

Utah previously brought its own state-court case against Kalshi businesses and Susquehanna trading firms on Oct. 20. In a separate federal proceeding, Kalshi had lost an August ruling concerning whether federal commodities law prevented Utah from enforcing its gambling restrictions.

Utah is seeking restrictions on certain contract categories, restitution, and the surrender of allegedly unlawful profits, as the state claims to be owed between $30.6 million and $61.2 million in fees through Oct. 19.

Kalshi spokesperson Jacki McGavick refuted the state's characterization, stating that customers trade against each other to determine prices through the exchange, and maintained the business adheres to federal law.