CFTC Sues Utah to Halt $60 Million Prediction Market Action

The Commodity Futures Trading Commission filed suit against the State of Utah on Monday, seeking to block Attorney General Derek Brown from pursuing up to $60 million in profit clawbacks from prediction market operator Kalshi and its affiliates. The filing, lodged in the US District Court for the District of Utah, escalates a widening conflict between federal and state authorities over who regulates event contracts.

Utah launched its own lawsuit against Kalshi last week, alleging the platform's event contracts constitute illegal betting and demanding the return of as much as $60 million in profits. The CFTC moved to stop that action before it advances, arguing the state is intruding on territory Congress reserved for the federal government.

What does the CFTC's filing argue?

Lawyers for the regulator contend Utah is attempting to bypass congressional intent to federally preempt state law by restricting the functioning of CFTC-registered exchanges. The filing frames the dispute as a question of market structure rather than gambling enforcement.

"The event contracts targeted by Utah are 'swaps' under the federal [Commodity Exchange Act], and the exchanges that offer these event contracts for trading are CFTC-regulated Designated Contract Markets [DCMs]," the lawsuit states. It adds that "Utah's efforts to prevent a CFTC-regulated DCM from offering CFTC-approved financial products intrude on the exclusive federal scheme Congress designed to oversee United States commodity derivatives markets."

The argument aligns with the position CFTC Chair Michael Selig has staked out for months: that the agency holds exclusive jurisdiction over prediction markets. That claim has already produced multiple lawsuits between state and federal authorities, and Utah is now the direct defendant rather than an interested party.

How has Kalshi responded?

Kalshi spokesperson Jacki McGavick addressed the original Utah lawsuit in a statement to Cointelegraph, drawing the same jurisdictional line the CFTC now argues in court.

"As a national derivatives market overseen by the CFTC, Kalshi answers to federal law, and no single state should have a veto over it," McGavick said.

The company's posture has support beyond the regulator. In September, New Jersey officials petitioned the US Supreme Court to hear their case against Kalshi, effectively asking the justices to settle whether federal law preempts state gambling statutes. Similar litigation is pending in Michigan, Ohio, Kentucky, Nevada, Massachusetts, Wisconsin and New York — eight states in total testing the limits of CFTC authority over event contracts.

What comes next?

As of Tuesday, the Supreme Court had not announced whether it will hear arguments in the New Jersey petition. A decision to take the case would give the justices a vehicle to resolve the preemption question that lower courts have so far handled inconsistently.

For Kalshi, the stakes are operational as much as legal. A ruling validating state authority would fragment a business model built on a single federal registration, forcing contract offerings to vary by jurisdiction. A ruling for the CFTC would consolidate oversight in Washington and likely shutter the string of state cases now pending. Meanwhile, the NBA recently named Kalshi and Polymarket as preferred exchanges under a deal signed with the CFTC, underscoring how quickly the sector is embedding itself in mainstream sports and finance before the courts settle its regulatory footing.

The District of Utah will now weigh the CFTC's request, and the Supreme Court's certiorari decision could arrive within months, setting the timetable for the most consequential jurisdictional ruling in prediction markets to date.