The Commodity Futures Trading Commission and the United States filed a federal lawsuit against the State of Utah and Attorney General Derek Brown, seeking to prevent the state from applying its gambling and public-nuisance laws to prediction markets registered with the federal agency. The complaint, lodged in the U.S. District Court for the District of Utah, argues that the Commodity Exchange Act grants the CFTC exclusive jurisdiction over event contracts traded on designated contract markets.

The action follows Utah’s October 20 state-court lawsuit against Kalshi Inc., related entities, and two Susquehanna trading firms. Utah alleged the companies operated an illegal gambling enterprise offering contracts on sports, elections, politics, and entertainment outcomes. State officials estimated Kalshi collected between $30.6 million and $61.2 million in fees from Utah accounts through mid-October and claimed residents incurred roughly $5.5 million in trading losses. More than 32,000 Utah residents held verified Kalshi accounts earlier in the year.

Federal Preemption Arguments

In its complaint, the CFTC contends that Utah’s enforcement efforts intrude on the exclusive federal scheme Congress established for commodity derivatives markets. The agency describes the targeted event contracts as swaps under the Commodity Exchange Act and the platforms offering them as CFTC-regulated designated contract markets. Plaintiffs seek a declaration that Utah’s gambling statutes, election-betting prohibition, and public-nuisance law are preempted when applied to covered federally regulated contracts. They also request preliminary and permanent injunctions barring state officials from investigating or enforcing those laws against regulated exchanges, their affiliates, and partners.

Federal lawyers invoke express preemption, field preemption, and conflict preemption. They argue that allowing states to impose restrictions would subject national markets to potentially 50 separate regulators and create uncertainty over the scope of federal jurisdiction. The complaint states that state actions inject uncertainty into federal derivatives markets and obstruct the national system for listing and overseeing such products.

Prior Court Rulings Complicate the Dispute

The new federal case arrives after an earlier setback for Kalshi in Utah. On August 4, U.S. District Judge Robert J. Shelby ruled that the Commodity Exchange Act did not prevent Utah from enforcing its anti-gambling laws against Kalshi’s sports contracts. Kalshi appealed, but the 10th U.S. Circuit Court of Appeals denied a request for an injunction pending appeal on September 8. That underlying appeal remains pending.

Utah has characterized Kalshi’s platform as an online casino operating under the label of a prediction market. The state seeks to halt the activity, require surrender of allegedly unlawful profits, and provide compensation to affected customers. Kalshi has maintained that its exchange operates under federal oversight and that individual states lack authority to prohibit its regulated contracts.

Broader National Campaign

Utah is the tenth state against which the CFTC has initiated legal proceedings over prediction-market authority. Earlier actions targeted New York, Kentucky, Rhode Island, Arizona, Minnesota, Wisconsin, New Mexico, Connecticut, and Illinois. The commission has also submitted briefs in four federal courts of appeal and one state supreme court. Officials describe the campaign as a defense of exclusive federal jurisdiction over commodity derivatives, including event contracts used for hedging, investment, and public information about future outcomes.

The dispute forms part of a wider pattern of tension between federal derivatives regulation and state gambling laws. Several states have argued that sports-related event contracts function as traditional betting and fall under state authority, including tax and regulatory frameworks. Federal regulators counter that once products are listed and supervised on designated contract markets, state interference undermines the uniform national system established by Congress.

Court proceedings in Utah and other jurisdictions will test the reach of federal preemption in this area. Outcomes could affect the ability of prediction-market platforms to operate consistently across state lines while remaining subject to CFTC oversight.