CFTC sues Utah, saying the state is trying to shut down prediction markets
The agency says federal law preempts Utah's efforts against CFTC-registered exchanges. The court has yet to weigh in, and Utah won an earlier round against Kalshi.
By James Mitchell ·
Why it matters: The outcome could decide whether state gambling laws can shut CFTC-registered prediction markets out of a state, and the CFTC says it is fighting nine other states too.
For information only, not investment advice.
The federal markets regulator is taking Utah to court over prediction markets. The Commodity Futures Trading Commission said Tuesday it has sued Utah to block the state's efforts to shut down CFTC-registered exchanges using state laws. The agency said the suit follows Utah's civil enforcement actions in state court against CFTC-regulated markets and other businesses.
The CFTC's argument is that Utah is obstructing Congress's decision to federally preempt state law. "Utah seeks to shut down prediction markets across a wide variety of markets," CFTC Chairman Michael S. Selig said. "Congress entrusted the CFTC to be the federal regulator with sole responsibility to oversee these markets."
Utah's own Oct. 20 state-court complaint against Kalshi alleged the platform collected $30.6 million to $61.2 million in local trading fees while residents lost $5.5 million on wagers, Global Gaming Insider reported. Those figures are the state's allegations. Kalshi is not a defendant in the new federal case, the publication said.
The new suit's sole count invokes the Constitution's Supremacy Clause, and the court has yet to assess the claims, according to Global Gaming Insider. In a separate case, US District Judge Robert Shelby sided with Utah in August, finding federal commodities law did not override the state's gambling restrictions on Kalshi's sports contracts. The Tenth Circuit then declined Kalshi's emergency request to pause enforcement while it appeals.
Utah is not the only front. The CFTC said it has started legal proceedings against nine other states and filed briefs in four federal appeals courts and one state supreme court. For anyone trading event contracts, the question is whether a single federal regulator or each state's gambling laws decide what can be listed.
Sources
- CFTC Sues to Block State Enforcement in Utah Amid Ongoing Efforts to Preserve Jurisdiction, Commodity Futures Trading Commission
- US government and CFTC sue Utah over prediction market enforcement, Global Gaming Insider
- Tenth Circuit denies Kalshi's emergency motion for injunction pending appeal, VitalLaw (Wolters Kluwer)
Tags: regulation