Utah Targets Kalshi for Up to $60 Million; CFTC Says Federal Rules Call the Shots

The US Commodity Futures Trading Commission (CFTC) sued the State of Utah and Utah Attorney General Derek Brown on Tuesday to block enforcement actions against CFTC-registered prediction markets, following a Monday filing in the US District Court for the District of Utah. The lawsuit came a week after Utah officials announced legal action against Kalshi and its affiliates over allegedly illegal betting. Utah Attorney General Derek Brown said he would sue to compel them to return up to $60 million in profits allegedly obtained illegally.

Kalshi had lost its case in Utah and was now open to enforcement under Utah state gambling statutes. The CFTC argued that Utah was attempting to bypass congressional intent to “federally preempt state law” by “restrict[ing] the functioning of CFTC-registered exchanges.” “The event contracts targeted by Utah are ‘swaps’ under the federal [Commodity Exchange Act], and the exchanges that offer these event contracts for trading are CFTC-regulated Designated Contract Markets [DCMs],” the lawsuit said. It added: “Utah’s efforts to prevent a CFTC-regulated DCM from offering CFTC-approved financial products intrude on the exclusive federal scheme Congress designed to oversee United States commodity derivatives markets.”

CFTC Chairman Michael S. Selig, who has claimed for months that the regulator has “exclusive jurisdiction” over prediction markets, said Utah was attempting to shut down prediction markets across several categories. He said event contracts are hedges that can also be used to gather information about future results. Kalshi spokesperson Jacki McGavick told Cointelegraph: “As a national derivatives market overseen by the CFTC, Kalshi answers to federal law, and no single state should have a veto over it.”

The Utah lawsuit expands the CFTC’s legal challenges to 10 states, after the agency filed similar action against nine other states over restrictions on CFTC-registered prediction markets. The CFTC is also investigating whether Polymarket violated its 2022 settlement by allowing U.S. users to access offshore markets.

In September, New Jersey officials petitioned the Supreme Court to weigh in on their case against Kalshi, alongside similar lawsuits pending in Michigan, Ohio, Kentucky, Nevada, Massachusetts, Wisconsin and New York. As of Tuesday, the Supreme Court had not announced whether it would hear arguments in the case. The dispute may be resolved only by a Supreme Court decision.