CFTC Sues Utah to Block Kalshi Crackdown After State’s Court Victory

Utah sued Kalshi last week, and now the federal government is suing Utah.

The Commodity Futures Trading Commission (CFTC) and the U.S. Department of Justice filed suit Monday against Utah and Attorney General Derek Brown, seeking to block enforcement of state gambling laws against federally regulated prediction markets. The complaint requests preliminary and permanent injunctions.

The filing comes six days after Brown sued Kalshi entities and two Susquehanna firms, seeking to stop their alleged gambling operations and recover money. That state action targets sports, election, political, cultural and mentions contracts, not just markets that resemble sportsbook wagers.

The CFTC argues that Utah’s enforcement action “threatens to wipe out the operation of CFTC-regulated exchanges within the State.”

Utah, however, has already secured a federal district court ruling rejecting Kalshi’s claim that federal regulation shields its sports contracts from state gambling law. The new lawsuit brings the federal government directly into that confrontation.

The CFTC has sued Utah, just days after the state filed its own lawsuit against Kalshi.

Utah becomes the 10th state the federal regulator has sued to block enforcement against prediction markets. pic.twitter.com/LAORUZBmOu

— Chavdar Vasilev (@ChavVasilev) October 27, 2026

CFTC warns against a 50-state regulatory patchwork

The 33-page federal complaint advances the regulator’s familiar position: Event contracts are swaps governed by the Commodity Exchange Act, and federal law displaces conflicting state gambling restrictions.

Allowing states to regulate those contracts would leave exchanges facing “the prospect of 50 regulators across the country,” the CFTC argues. It also contends that forcing exchanges to exclude Utah residents would conflict with federal requirements for impartial market access.

That creates a direct collision between two regulatory positions. Utah says the products are illegal gambling that it can prohibit. The CFTC says the state is interfering with federally regulated markets.

For exchanges, the stakes extend beyond whether a particular sports contract stays available. Utah’s broader effort could restrict multiple categories of trading and reach firms that provide market liquidity.

Utah has already won one round

This is the third distinct legal front in the Utah fight.

Kalshi first sued Utah officials in February, arguing that federal commodities law prevented enforcement of the state’s gambling restrictions. In August, U.S. District Judge Robert J. Shelby granted summary judgment to Utah and closed that case.

That was a district court ruling on the merits, not merely a refusal to issue temporary protection. Kalshi appealed, but the Tenth Circuit Court of Appeals denied its request for an emergency injunction while the appeal proceeds.

Utah then brought its own state-court enforcement action Oct. 20. The new CFTC and Justice Department lawsuit, filed Monday, separately asks a federal court to restrain the state.

Utah’s case reaches the firms behind the trading

Brown’s Oct. 20 complaint names Kalshi entities and two Susquehanna entities, alleging unlawful gambling, public nuisance, unjust enrichment and civil conspiracy.

The state seeks preliminary and permanent injunctions, court-approved third-party geolocation controls, restitution, damages and disgorgement. It wants to stop contracts across sports, elections, politics, culture and mentions.

Utah alleges that Kalshi collected approximately $30.6 million to $61.2 million in fees from wagers placed by Utah users.

Including the Susquehanna firms broadens the enforcement target beyond the exchange itself to businesses involved in making markets. The CFTC’s response therefore comes as Utah tries to restrict both the platform and parts of the infrastructure supporting its contracts.

Another federal case in a divided legal landscape

Utah is the 10th state where the CFTC has pursued legal action challenging state enforcement against prediction markets, according to Gambling Insider. The agency has secured favorable preliminary injunctions in:

• Arizona

• Minnesota

• Illinois

Meanwhile, a Wisconsin judge found that the CFTC had not shown a likelihood of success.

Other federal cases are also testing the significance of the CFTC’s Oct. 9 rulemaking.

In Kentucky, the federal government, state defendants and an intervenor filed supplemental briefs Oct. 23 after the court requested arguments addressing the Sixth Circuit’s September ruling and forthcoming CFTC rules.

In New York, officials have challenged the validity and relevance of the CFTC’s interim final rule in briefing on the federal government’s pending injunction request.

The bigger question remains headed toward possible Supreme Court review

The wider dispute has already produced conflicting appellate outcomes. The Third Circuit sided with Kalshi in New Jersey, while the Ninth Circuit ruled against it in Nevada. The Sixth Circuit also rejected Kalshi’s bid for preliminary protection in the linked Ohio and Tennessee appeals.

New Jersey is asking the Supreme Court to review the Third Circuit decision. Related Nevada petitions provide another possible route for the justices to address the divide. The court has not agreed to hear the cases, and Kalshi’s response in the New Jersey matter is due November 9.