CFTC and Justice Department Sue Utah Over Prediction Market Enforcement
The Commodity Futures Trading Commission (CFTC) and U.S. Justice Department have sued Utah and Attorney General Derek Brown, seeking to prevent the state from enforcing its gambling laws against federally regulated prediction markets.
The complaint, filed Oct. 26 in the U.S. District Court for the District of Utah, follows the state's Oct. 20 lawsuit against several prediction market apps.
Federal officials are requesting preliminary and permanent injunctions preventing Utah from investigating or taking enforcement action against CFTC-regulated exchanges, their affiliates and partners over covered transactions.
The CFTC announced the lawsuit Oct. 27, escalating an ongoing dispute over whether sports event contracts fall under federal commodities regulation or state gambling laws.
CFTC argues for exclusive federal oversight
The federal government's argument centers on the Commodity Exchange Act, which grants the CFTC authority over federally regulated derivatives markets. The complaint maintains that event contracts offered on designated contract markets qualify as swaps and are subject to the agency's exclusive jurisdiction.
Sports event contracts allow customers to trade on outcomes such as which team wins a game, creating similarities with traditional sports betting. Utah considers the products illegal gambling, while federal officials argue that allowing states to prohibit the contracts would undermine the national regulatory framework established by Congress.
"Congress entrusted the CFTC to be the federal regulator with sole responsibility to oversee these markets," Chairman Michael S. Selig said in the agency's Oct. 27 announcement.
The requested injunctions would prevent Utah from applying its gambling restrictions, election-betting prohibition and public-nuisance laws to covered transactions on federally regulated exchanges.
Utah already secured court victory
The new lawsuit follows a significant legal defeat for Kalshi in Utah earlier this year. On Aug. 4, U.S. District Judge Robert Shelby granted summary judgment for Utah, rejecting Kalshi's argument that the Commodity Exchange Act barred the state from enforcing its gambling laws.
Shelby concluded that federal commodities regulation did not expressly or implicitly preempt Utah's authority to enforce its anti-gambling restrictions against Kalshi. The ruling also denied Kalshi's preliminary injunction request as moot and closed that district court case.
Utah subsequently filed its Oct. 20 enforcement lawsuit against Kalshi-related companies and Susquehanna entities, alleging unlawful gambling activity. The CFTC's latest action challenges that enforcement effort through a separate federal lawsuit.
The earlier judgment remains relevant, but it does not automatically decide the new case.
Broader regulatory fight continues
The Utah dispute is part of a growing national conflict over prediction-market oversight. Federal appeals courts have reached different conclusions about whether sports event contracts qualify for protection from state gambling laws, with cases involving New Jersey, Nevada, Ohio and Tennessee producing conflicting interpretations.
The CFTC has increasingly intervened to defend what it considers its exclusive jurisdiction.
In its Oct. 27 announcement, the commission said it had initiated legal proceedings against nine other states and submitted briefs in four federal appeals courts and one state supreme court. For now, Utah's gambling restrictions remain in place, and the federal government's requested injunctions have not been granted.
The latest lawsuit puts the dispute directly between state and federal authorities, adding another significant case to the broader legal battle over who controls sports prediction markets.
