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State of Play
- Kalshi has sued Utah officials seeking to block enforcement of state gambling laws against its prediction markets.
- The company argues federal commodities law gives the Commodity Futures Trading Commission exclusive jurisdiction over its event contracts, putting Utah’s proposed crackdown in conflict with federal authority.
- This dispute could determine whether states can treat CFTC-regulated prediction markets as illegal gambling or whether federal pre-emption will protect nationally licensed exchanges.
Prediction market firm Kalshi filed suit on Feb. 23 in the US District Court for the District of Utah asking for declaratory and injunctive relief against state officials, including Gov. Spencer J. Cox and Attorney General Derek Brown.
The complaint says Utah’s efforts – including public statements and a bill (House Bill 243) that would explicitly classify prop bets as illegal gambling – are aimed at blocking Kalshi’s federally authorized event contracts.
Kalshi points to the Commodity Exchange Act and asserts the Commodity Futures Trading Commission (CFTC) has exclusive jurisdiction over futures and swaps traded on designated contract markets. The filing seeks a temporary restraining order and preliminary injunction to prevent civil or criminal enforcement while the case proceeds, noting recent preliminary injunctions in Tennessee and New Jersey that favored Kalshi’s pre-emption arguments.
Outcome could impact other states
If Utah enforces HB243 or similar actions succeed, residents could face criminal exposure for participating in prediction markets and operators may be forced to geofence or suspend services in the state.
Operators face higher compliance costs, legal fees, and the prospect of a patchwork regulatory landscape that would complicate national offerings.
Conversely, if federal pre-emption holds – as Kalshi argues and some courts have preliminarily found – CFTC-regulated exchanges would gain clearer protection to operate across states, improving product availability and regulatory certainty.
The outcome will influence how quickly prediction markets can scale and how other states craft gambling or regulatory responses.
Based on reporting by Erik Gibbs for NextI0.
