The agency filed for declaratory and injunctive relief after Utah sued Kalshi in state court, calling the platform a public nuisance. By the commission's own count it has now begun proceedings against ten states and filed briefs in four federal courts of appeal and one state supreme court.
The Commodity Futures Trading Commission said on October 27 that it had sued the state of Utah to stop it from closing federally registered markets under state gambling law. The agency filed a complaint for declaratory and injunctive relief in the US District Court for the District of Utah, Central Division, naming the state and Attorney General Derek Brown as defendants, according to The Block.
Utah is the tenth state the commission has taken to court. Its release says the agency has begun legal proceedings against nine other states and filed briefs in four federal courts of appeal and one state supreme court, without naming any of them. The Block identified the nine as Arizona, Connecticut, Illinois, New York, Wisconsin, Minnesota, Rhode Island, New Mexico and Kentucky.
What prompted the federal suit was a state one. Utah sued Kalshi in state court, alleging that the platform offered illegal gambling to residents under laws covering sports, elections and politics, and calling it a "public nuisance that is causing substantial ongoing harm," The Block reported. The commission's own release names no company. It refers only to "CFTC-regulated markets and other businesses," and does not identify the Utah statutes at issue or give a docket number.
Michael S. Selig, the commission's chairman, said "Utah seeks to shut down prediction markets across a wide variety of markets" and that "Congress entrusted the CFTC to be the federal regulator with sole responsibility to oversee these markets." The release argues that Utah's actions interfere with Congress's decision to preempt state law, and carries an unattributed statement that the commission will protect federal sovereign interests when a state challenges the lawful operation of a derivatives exchange. It cites no provision of the Commodity Exchange Act and sets out no detailed preemption theory.
The posture separates this filing from most of this year's prediction-market litigation, in which the exchanges have been the ones going to federal court. When Missouri moved against sports event contracts, North American Derivatives Exchange and Novig asked federal judges on October 16 to stop the state enforcing its gambling laws while four other operators held back. In Utah the regulator is the plaintiff, asserting its own jurisdiction rather than defending a listing.
Courts have not settled the question the commission is asserting. A unanimous Sixth Circuit panel held in September that Kalshi's sports event contracts are not swaps, reasoning that a game result carries no financial consequence of its own. The company had won in the Third Circuit, and the NFL has asked the Supreme Court to review that decision. New Jersey has separately asked the court whether Dodd-Frank preempts state sports betting law, and Kalshi's response there is due on November 9.
The states have not conceded the point. In these disputes they have argued that sports betting falls within their own jurisdiction and that the platforms are operating illegally and avoiding state taxes, The Block reported. That argument is about gambling law rather than derivatives regulation, and it is the collision the commission is asking a federal judge to resolve in its favor before any of the appeals conclude.
The commission is also pursuing the boundary by rule. It has proposed writing event contracts into the swap definition, naming sports, politics, cultural and weather events, with a companion interim final rule that places casino-style gambling outside the definition. The rulemaking and the lawsuits address the same jurisdictional line from opposite directions, and neither has resolved it.
Utah's attorney general's office did not immediately respond to The Block's request for comment. The commission's release does not say what relief it expects or when, and the agency has now opened a tenth state front while the preemption question is pending at the Supreme Court.
