US prediction market dispute escalates as CFTC sues Utah
The US Commodity Futures Trading Commission has filed a lawsuit against Utah, seeking to prevent the state from enforcing its gambling laws against federally regulated prediction market exchanges.
The action follows Utah’s decision to pursue legal proceedings against Kalshi and associated businesses over allegedly unlawful sports and election betting, with the federal regulator arguing that Utah is attempting to exercise authority over financial contracts already subject to federal supervision.
The CFTC wants the court to prevent Utah from applying its gambling laws to qualifying contracts traded on registered derivatives exchanges.
The lawsuit names Utah Attorney General Derek Brown and follows the state’s October 20 action against Kalshi.
Utah alleges that the company has offered illegal gambling products to residents despite the state’s restrictions, with the state seeking to prevent Kalshi from offering sports, election and other event contracts within its borders.
However, the CFTC maintains that Congress granted the federal regulator exclusive authority over commodity derivatives, including qualifying event contracts.
CFTC chairman Michael Selig said the agency would defend its jurisdiction.
“Utah seeks to shut down prediction markets across a wide variety of markets,” Selig said.
“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 latest lawsuit is particularly significant because Utah has already secured a favourable federal court ruling in its dispute with Kalshi.
In August, a federal judge rejected Kalshi’s argument that federal commodities legislation prevented Utah from enforcing its gambling laws.
Kalshi appealed the decision, but the Tenth Circuit Court of Appeals subsequently refused to grant an injunction protecting the company’s operations while the appeal proceeded.
The new CFTC action therefore introduces a separate federal challenge in a jurisdiction where state authorities have previously prevailed.
According to the regulator, Utah is the tenth state against which it has initiated legal proceedings over prediction market restrictions.
Similar disputes are underway across the United States, with courts reaching differing conclusions about whether sports event contracts fall within federal derivatives legislation.
Those conflicting decisions have increased pressure for a definitive ruling on the division of authority between federal financial regulators and state gambling commissions.
The dispute has implications for conventional sports betting sites, which must obtain state gambling licences and comply with local betting regulations.
Several conventional gambling sites in the USA have already entered the prediction market space with DraftKings Predictions and FanDuel Predicts operating in select states.
