The Commodity Futures Trading Commission (CFTC) escalated its defense of federal oversight of prediction markets on October 27, 2026, by filing a lawsuit against the State of Utah and Attorney General Derek Brown.
The action was brought in the U.S. District Court for the District of Utah, Central Division, seeking to halt the state’s use of its own laws to restrict or close markets registered with and supervised by the CFTC.
The filing responds directly to Utah’s recent decision to pursue civil enforcement actions in state court against CFTC-regulated contract markets and related businesses.
Federal officials contend that these state measures interfere with Congress’s clear choice to preempt conflicting state rules through the Commodity Exchange Act, which assigns the CFTC sole responsibility for regulating commodity derivatives, including event contracts commonly known as prediction markets.
CFTC Chairman Michael S. Selig underscored the agency’s stance.
He noted that Utah is attempting to shut down prediction markets spanning many different subject areas.
Event contracts, he explained, function not only as tools for hedging risk and investment but also as mechanisms that deliver public information about the likely outcomes of future events.
Congress designated the CFTC as the exclusive federal regulator for these markets, and the Commission intends to protect that jurisdiction over commodity derivatives.
This lawsuit marks the tenth state against which the CFTC has initiated formal legal proceedings to preserve its authority.
The agency has additionally filed supporting briefs in four federal courts of appeal and one state supreme court as part of the same broader effort.
The Commission has repeatedly stated that it will intervene whenever a state challenges the lawful operations of a derivatives exchange under federal law, describing such challenges as threats to federal sovereign interests.
The dispute centers on platforms that list contracts whose value depends on the occurrence of real-world events—ranging from sports results and election outcomes to other measurable happenings.
Participants trade with one another rather than against a traditional sportsbook, and the CFTC treats the contracts as regulated financial instruments when they are offered on designated contract markets. Utah, by contrast, has long prohibited nearly all forms of gambling under its constitution and statutes.
On October 20, 2026, Attorney General Brown’s office sued Kalshi and affiliated entities in state court, characterizing the platform’s offerings as illegal gambling and a public nuisance that harms residents.
The state seeks to bar the company from accepting Utah users, require technological measures to enforce geographic restrictions, and recover fees it estimates in the tens of millions of dollars.
Kalshi maintains that its operations are those of a federally supervised exchange comparable to traditional futures markets, and that no individual state may override that framework.
Earlier in 2026, a federal district judge in Utah ruled that the Commodity Exchange Act did not prevent the state from applying its gambling prohibitions to certain of Kalshi’s contracts; that decision is under appeal in the Tenth Circuit.
The new CFTC suit asks the federal court for a declaratory judgment confirming exclusive federal authority and for preliminary and permanent injunctions blocking Utah from enforcing its gambling, election-related, and public-nuisance laws against transactions on CFTC-registered exchanges, including actions aimed at affiliates and partners of those exchanges.
The case adds another layer to a nationwide conflict between federal derivatives regulation and state gaming authorities.
Multiple states have argued that sports-related and other event contracts are functionally indistinguishable from traditional betting and therefore fall within their police powers and tax regimes.
The CFTC counters that Congress created a comprehensive federal scheme precisely to avoid a patchwork of state restrictions that could fragment national markets. How the Utah federal court resolves the preemption questions will influence both the immediate availability of these contracts to Utah residents and the larger regulatory landscape for prediction markets across the country.
