The federal government is asking a Utah judge to stop the state from enforcing its gambling laws against federally regulated prediction markets. The CFTC announced the lawsuit October 27, a day after it was filed.
The case concerns who can regulate event contracts offered to Utah residents. The filing is a request for court protection. It does not itself grant that protection or establish a nationwide right to trade every kind of event contract.
What the federal lawsuit asks for
The United States and Commodity Futures Trading Commission sued Utah and Attorney General Derek Brown in his official capacity. Kalshi is identified in the federal complaint, but is not a plaintiff in this new case.
The government argues that the contracts Utah targets qualify as swaps under the Commodity Exchange Act and fall under the CFTC's exclusive jurisdiction. It says Utah's restrictions would interfere with a national derivatives market and with federal requirements for impartial access. Those are the government's contested legal arguments.
The requested injunction reaches investigations and enforcement involving regulated entities and their affiliates and partners. Its scope is tied to transactions listed, offered or executed on federally regulated designated contract markets. It would not exempt every activity of every connected business from Utah law.
The complaint also asks for a declaration that Utah's laws are invalid as applied to those transactions.
What Utah wants to stop
Utah brought its own state-court lawsuit October 20 against Kalshi businesses and Susquehanna trading firms. The attorney general's announcement alleges that the platform lets residents gamble on sports, elections, politics and other outcomes, violating state law. It also alleges a public nuisance causing ongoing harm.
Utah's constitution bars the Legislature from authorizing gambling. Brown's office argues that calling the products event contracts does not put them beyond that prohibition.
At the October 20 announcement, Brown said the state wanted a court-approved geolocation provider to enforce restrictions, according to KUER's reporting. Utah also seeks restitution and the surrender of profits. A request to recover money does not establish that a particular customer will receive a refund.
Kalshi told KUER that it answers to federal law and that one state should not have a veto over the exchange.
Utah already won a separate ruling
The new lawsuit follows an earlier case Kalshi brought against Utah officials. On August 4, US District Judge Robert J. Shelby granted summary judgment to the state, concluding that the Commodity Exchange Act did not preempt Utah's enforcement of its anti-gambling laws against Kalshi.
The 25-page order directly addresses the access argument. Shelby read the federal impartial-access requirement in the context of financial discrimination. He found that Kalshi had not shown compliance with both federal and Utah law was impossible. Existing restrictions on who may trade particular contracts helped inform that reasoning.
On September 8, the Tenth Circuit denied Kalshi's request for an injunction pending appeal. That two-page order denied interim protection; it was not a final decision on the appeal. The attorney general's account and SBC Americas' October 27 report say the appeal remains pending.
How the products and the court fight differ
The CFTC's consumer explanation describes a common event contract as a yes-or-no position with a fixed payout, usually $1, and an expiration tied to time or an event. Correct predictions can pay out; incorrect ones can lose the amount invested. Fees and taxes can affect returns.
That product description explains the transaction's mechanics. The Utah litigation concerns whether federal derivatives oversight displaces state gambling restrictions on those transactions.
The CFTC says it has initiated proceedings against nine other states. SBC Americas reports that courts have reached differing conclusions, including a Wisconsin judge's July denial of the agency's request for preliminary protection. Federal registration therefore should not be read as a settled answer to every state's enforcement dispute.
For the new Utah case, the specific decision to watch is whether a judge grants the requested injunction and exactly which transactions and entities any order covers.
