Prediction market operator Kalshi has filed suit against Utah state officials, seeking to block enforcement of state gambling laws that the company says conflict with federal commodities regulation.

In a complaint filed Feb. 23 in the U.S. District Court for the District of Utah, Kalshi requests declaratory and injunctive relief against several officials, including Gov. Spencer J. Cox and Attorney General Derek Brown. The lawsuit challenges what Kalshi describes as state efforts to curtail its event-based contracts, which are regulated at the federal level. At the center of the dispute is proposed legislation, House Bill 243, that would classify certain proposition-style bets as illegal gambling under Utah law. Kalshi argues that such measures directly target its federally authorized prediction market products.

Federal Authority Versus State Gambling Law

Kalshi’s legal argument rests on the Commodity Exchange Act, which governs derivatives markets in the United States. The company maintains that the Commodity Futures Trading Commission (CFTC) has exclusive jurisdiction over futures and swaps traded on designated contract markets, including its event contracts.

According to the complaint, Utah’s public statements and legislative proposals amount to an attempt to regulate or prohibit products that fall squarely under federal oversight. Kalshi is seeking a temporary restraining order and preliminary injunction to prevent civil or criminal enforcement actions while the case proceeds. The filing also references recent preliminary injunctions in Tennessee and New Jersey that sided with Kalshi’s federal pre-emption arguments, suggesting a growing judicial recognition of the CFTC’s primary authority in this area.

The case highlights a widening tension between state gambling frameworks and federally regulated financial products that resemble wagering. If Utah moves forward with enforcement of HB 243 or similar actions prevail, residents could potentially face criminal liability for participating in certain prediction markets. Operators, in turn, may be forced to geofence the state or suspend services altogether.

Such outcomes would likely increase compliance costs and legal exposure for exchanges operating nationwide. A state-by-state enforcement model could create a patchwork regulatory environment, complicating efforts to offer uniform products across jurisdictions.

Conversely, a ruling affirming federal pre-emption would strengthen the position of CFTC-regulated exchanges and provide clearer legal protection for operating across state lines. That could accelerate the expansion of prediction markets and offer greater regulatory certainty to operators and participants.

The Commodity Exchange Act gives the CFTC exclusive jurisdiction over our event contracts, and Utah’s actions directly conflict with that federal authority.

A Defining Test Case

At stake is a fundamental question: whether states can treat CFTC-regulated event contracts as illegal gambling under their own laws, or whether federal commodities regulation supersedes those efforts.

The outcome in Utah could shape how other states approach prediction markets, influencing legislative drafting, enforcement strategies and the broader balance of power between state gambling authorities and federal financial regulators. As prediction markets continue to blur the lines between financial instruments and wagering products, courts may increasingly be called upon to clarify where regulatory boundaries lie.