Utah calls Kalshi’s markets illegal gambling. Federal regulators say the state is overstepping its authority.
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Key Takeaways
The CFTC and Justice Department are challenging Utah’s enforcement against prediction markets.
The requested protection extends to regulated businesses’ affiliates and partners.
A lawsuit follows an earlier Utah court victory against Kalshi and a widening state crackdown.
The federal government is suing Utah to block the state’s attempt to stop Kalshi from offering prediction markets to its residents.
Utah argues that Kalshi’s contracts, which let users trade on the outcomes of sports, elections, and other events, constitute illegal gambling.
Meanwhile, the Commodity Futures Trading Commission (CFTC) says those products fall under federal financial regulation and that Utah has no authority to ban them.
The lawsuit, filed on Oct. 26 and announced the following day, makes Utah the tenth state to face legal action from the regulator over prediction markets.
Federal Regulators Challenge Utah’s Kalshi Crackdown
The federal case follows Utah Attorney General Derek Brown’s Oct. 20 lawsuit against Kalshi businesses and two Susquehanna trading firms that participate in its markets.
Utah wants to prevent the companies from offering several categories of event contracts to residents and recover money it alleges they earned through illegal gambling.
The United States and CFTC have now filed a separate lawsuit against Utah and Brown in federal court, asking a judge to block that enforcement effort.
Their argument centers on who has authority over the contracts.
The federal government says they qualify as swaps, a type of financial derivative regulated under the Commodity Exchange Act.
It argues that Congress gave the CFTC exclusive authority over these transactions, preventing Utah from applying its gambling laws to them.
“Congress entrusted the CFTC to be the federal regulator with sole responsibility to oversee these markets,” CFTC Chairman Michael Selig said.
Selig said event contracts can help users manage financial risks and invest, while also providing information about likely future outcomes.
Utah has disputed that, alleging the companies are facilitating gambling regardless of how their products are described.\
Utah Has Already Won One Round
The new federal action arrives after a setback for Kalshi in its own Utah litigation.
On Aug. 4, US District Judge Robert Shelby granted Utah summary judgment, finding that federal commodities law did not override the state’s gambling laws.
The Tenth Circuit denied Kalshi’s request for an injunction pending appeal on Sept. 8, according to SBC Americas.
Prediction Markets Face a Wider State Crackdown
Utah’s action follows months of challenges to the industry’s argument that federal derivatives oversight prevents states from applying gambling laws.
As CCN reported in August, a Washington state judge ordered Kalshi to restrict access to markets covering sports, elections, politics, and other categories. That dispute showed how enforcement could extend beyond sports betting.
Regulatory pressure has also forced businesses to change their product offerings.
Founder Jeremy Levine said those states had effectively required the company to choose between retaining its fantasy licenses and continuing its federally regulated prediction-market products.
Consumer protections are another point of contention.
Prediction-market age limits highlight that Kalshi and Polymarket US accept eligible customers from 18, while New York’s licensed mobile sportsbooks require users to be 21.
New York has challenged both operators over alleged unlicensed gambling.
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Kurt Robson is a London-based reporter at CCN, specialising in the fast-moving worlds of crypto and emerging technology. He began his career covering local news in Cornwall after graduating from Falmouth University with First Class Honours in Journalism. There, he cut his teeth on everything from council meetings to missing swans.
He quickly rose through the ranks to become a frontline journalist at several of the UK’s leading national newspapers. Over the years, he has interviewed musicians and celebrities, reported from courtrooms and crime scenes, and secured multiple front-page exclusives.
Following the upheaval of the COVID-19 pandemic, Kurt shifted his focus to technology journalism—just ahead of the AI boom. With a natural curiosity and a trained eye for emerging trends, he has found a new rhythm in reporting on innovation.
At CCN, Kurt's work focuses on the cutting edge of crypto, blockchain, AI, and the evolving digital world. Drawing on his background in people-first reporting and his deep interest in disruptive tech, Kurt delivers stories that are insightful, entertaining, and human-centric.
