US and CFTC Sue Utah Over Gambling Enforcement on Prediction Markets

The Commodity Futures Trading Commission announced on 2026년 10월 27일 that the United States and the agency have filed a federal lawsuit against the State of Utah and Utah Attorney General Derek Brown, seeking to block the state’s efforts to shut down CFTC-registered contract markets using state law. The lawsuit follows Utah’s decision to file civil enforcement actions in state court against CFTC-regulated markets and other businesses. The CFTC said Utah’s effort to restrict the functioning of CFTC-registered exchanges obstructs Congress’s decision to federally preempt state law.

“Utah seeks to shut down prediction markets across a wide variety of markets,” said CFTC Chairman Michael S. Selig. “Event contracts do not just serve hedging and investment purposes—they also provide the public with information about the outcome of future events. 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.”

The Commission has also initiated legal proceedings against nine other states and has submitted briefs in four federal courts of appeal and one state supreme court, according to the release.

Utah’s State-Court Case Against Kalshi

The Complaint for Declaratory and Injunctive Relief, filed in the U.S. District Court for the District of Utah, Central Division, as Case No. 26-1055 and dated 2026년 10월 26일, describes the state action it seeks to stop. On 2026년 10월 20일, Utah, through Attorney General Brown, filed an enforcement action in the Third Judicial District Court in and for Salt Lake County, Brown v. Kalshi Inc., et al., No. 260908356, against Kalshi Inc., KalshiEX LLC, Kalshi Klear Inc., Kalshi Klear LLC, Kalshi Trading LLC, Susquehanna International Group LLP, and Susquehanna Government Products LLLP, according to the federal complaint.

Utah’s complaint alleges that the defendants began offering gambling bets to Utah residents by at least 2024년 9월 even though sports bets and other forms of gambling are illegal under Utah law, and it contends that “Kalshi’s online gambling bets are indistinguishable from the bets offered by a traditional sportsbook,” the federal complaint recounts. The state alleges violations of Utah Code §§ 76-9-1402, 76-9-1403, 76-9-1405, 76-9-1407, and 76-9-1408, as well as § 20A-1-606(2) for wagers tied to the 2024 and 2026 primary and general elections, and it brings a public-nuisance claim under § 78B-6a-102(2). Utah seeks declaratory judgment, a permanent injunction, restitution, damages, disgorgement, punitive damages, fees, costs, and pre- and post-judgment interest, and it seeks to enjoin transactions in event-contract categories including Elections, Politics, Culture, Sports, and Mentions.

The Federal Preemption Case

The federal complaint argues that the event contracts Utah targets are swaps under Sections 1a(47)(A)(i), (ii), and (iv) of the Commodity Exchange Act, that the exchanges offering them are CFTC-regulated designated contract markets, and that 7 U.S.C. § 2(a)(1)(A) vests the Commission with exclusive jurisdiction over transactions involving swaps traded on those markets. It pleads express, field, and conflict preemption under the Supremacy Clause, contending that Utah’s enforcement would force designated contract markets to violate the CFTC’s impartial-access rule, 17 C.F.R. § 38.151(b), by denying event contracts to Utah residents, and would let state gambling law collaterally attack the CEA’s self-certification process, under which the Commission alone can order non-compliant contracts taken down.

The plaintiffs ask the court to declare the Utah laws preempted, unconstitutional, and invalid as applied to transactions listed, offered, or executed on CFTC-regulated designated contract markets; to issue preliminary and permanent injunctions barring the defendants and their successors, agents, and employees from investigating or enforcing Utah law against CFTC-regulated entities and their affiliates and partners; and to award costs and fees. The complaint argues that constitutional violations, including Supremacy Clause violations, are always irreparable, and that preliminary relief is required to preserve the status quo. It asserts jurisdiction under 28 U.S.C. §§ 1331 and 1345 and venue under 28 U.S.C. § 1391(b). The filing is signed by Timothy J. Borgerson, counsel to Assistant Attorney General Brett A. Shumate of the Justice Department’s Civil Division, and by CFTC attorneys including General Counsel Tyler S. Badgley. Brown is sued in his official capacity as Utah’s attorney general.

The complaint describes the Commission’s oversight apparatus: it designated KalshiEX as a contract market by order of 2020년 11월 3일; Kalshi Klear is registered as a derivatives clearing organization; and 30 exchanges hold active CFTC designations as contract markets, including Kalshi, the North American Derivatives Exchange (Nadex), and CME Group. The Commission monitors the event contracts that markets self-certify and stayed the listing of two contracts in orders dated October 21 and 2026년 10월 22일, and it has brought event-contract enforcement actions including CFTC v. Van Dyke and CFTC v. Spagnuolo, according to the complaint.

Beyond Utah, the complaint lists prior federal preemption actions against Arizona, Connecticut, Illinois, Kentucky, Minnesota, New Mexico, New York, Rhode Island, and Wisconsin, and states that preliminary injunctions have been entered in favor of the federal government in Arizona, Illinois, and Minnesota, citing KalshiEX LLC v. Flaherty, 172 F.4th 220 (3d Cir. 2026). It also cites a CFTC-SEC interim final rule published at 91 Fed. Reg. 65,969 on 2026년 10월 19일 that excludes casino-style gambling from the swap definition, and a notice of proposed rulemaking at 91 Fed. Reg. 66,022 the same day that would define event contracts based on sports, politics, weather, and cultural events as swaps. The Commission has signed memoranda of understanding with the National Basketball Association (2026년 10월 26일), Major League Baseball (2026년 3월 19일), and the National Hockey League (2026년 5월 21일) to share information on sports-related event contracts, the complaint notes.

The Utah suit extends a campaign the CFTC first announced on 2026년 4월 2일, when it filed lawsuits challenging actions by Arizona, Connecticut, and Illinois against CFTC-registered designated contract markets and pointed to an advanced notice of proposed rulemaking on prediction markets. That release states that the agency first officially recognized event contracts in 1992, when it allowed the Iowa Electronic Markets to operate, and that Congress granted the Commission comprehensive authority over such contracts following the 2008 financial crisis.