Utah became the tenth state sued by the CFTC over prediction markets, in a federal case announced October 27 that asks a court to block state gambling enforcement against federally regulated exchanges. The expanding lawsuit count measures the size of the jurisdictional fight; it does not establish that the CFTC has won it.
Two lawsuits, one week apart
The CFTC’s announcement puts the agency and the United States, through the Justice Department, on the offensive. Their case against Utah and Attorney General Derek Brown is in the US District Court for the District of Utah, No. 2:26-cv-01055.
The 33-page federal complaint advances one Supremacy Clause claim. It seeks a declaration that Utah’s anti-gambling statutes, election-betting prohibition and public nuisance law are preempted when applied to CFTC-regulated designated contract markets, or DCMs. It also requests preliminary and permanent injunctions protecting regulated entities and their affiliates and partners from investigation or enforcement under those laws.
That last category matters. Utah’s own lawsuit reaches beyond the exchange. Filed October 20 in the state’s Third District Court in Salt Lake County, it names five Kalshi entities and two Susquehanna firms: Susquehanna International Group and Susquehanna Government Products. October 20 to October 27 is one week.
According to SBC Americas’ account of Utah’s filing, the state alleges an illegal gambling enterprise and public nuisance. Utah alleges that Kalshi collected up to $61.2 million in fees and caused $5.5 million in losses to state residents. Those are the state’s allegations, not adjudicated losses or a federal damages award.
State attorneys general can bring civil enforcement actions under state law. Here, the federal plaintiffs want a federal judge to stop that enforcement because, they argue, Congress assigned the relevant market to federal supervision. Filing that request does not itself suspend Utah’s laws.
Utah has already beaten Kalshi in federal district court
The awkward fact for the CFTC is the local procedural record. Kalshi sued Utah officials in February. On August 4, US District Judge Robert Shelby granted Utah summary judgment, holding that the Commodity Exchange Act did not preempt the state’s anti-gambling laws. On September 8, the Tenth Circuit denied Kalshi’s request for an emergency injunction pending appeal.
Crypto.news reports that the new federal complaint does not cite either setback, instead emphasizing favorable decisions elsewhere. Kalshi’s appeal remains pending. The emergency denial is not a completed appellate decision on the merits, but Shelby’s judgment is a substantive obstacle that a fresh federal complaint does not erase.
The court names also need separating. Utah’s Third District Court is a state trial court. The US District Court for the District of Utah is a federal trial court, whose appeals go to the Tenth Circuit. The Third Circuit, which sided with Kalshi in New Jersey, is a different federal appellate court. Its ruling does not turn into binding Tenth Circuit precedent by appearing in the CFTC’s complaint.
The federal filing characterizes the alleged constitutional harm as irreparable and argues that Supremacy Clause violations necessarily warrant that treatment. That is the plaintiffs’ injunction argument. The court still has to evaluate the requested relief.
Ten states are testing the reach of federal registration
Utah joins Arizona, Connecticut, Illinois, Kentucky, Minnesota, New Mexico, New York, Rhode Island and Wisconsin in the CFTC’s litigation campaign since April. The agency says it has also submitted briefs in four federal appeals courts and one state supreme court.
Chairman Michael S. Selig frames event contracts as instruments for hedging, investment and public information, and maintains that Congress gave the CFTC exclusive oversight. His jurisdictional claim is the agency’s position in a contested case.
DCM designation means an exchange operates within the CFTC’s federal regulatory framework. The contested step is what follows from that designation when a state describes the exchange’s sports contracts as prohibited gambling. The Commodity Exchange Act, or CEA, supplies the federal statutory framework; the Supremacy Clause makes valid federal law controlling when state law conflicts with it.
Field preemption asks whether federal law occupies the relevant regulatory field so fully that state regulation is displaced. Conflict preemption asks whether the particular state rule conflicts with federal law, including by obstructing its operation. Courts can reject a broad field argument while accepting a narrower conflict argument. Neither inquiry is answered simply by pointing to a registration badge.
Our earlier Baltimore lawsuit coverage tracked this collision at the city level. Utah adds a federal enforcement-blocking action to a state dispute where Kalshi has already suffered a merits defeat.
The appellate split has reached the Supreme Court’s door
On April 6, the Third Circuit ruled 2–1 for Kalshi in KalshiEX LLC v. Flaherty, No. 25-1922. Judge David Porter’s majority treated the sports event contracts as swaps and found New Jersey’s gambling laws displaced through both field and conflict preemption. Judge Jane Roth dissented, emphasizing their resemblance to sportsbook wagers.
The Ninth Circuit reached the opposite swap-classification result in the Nevada litigation on August 28, finding the contracts likely outside the statutory definition. The Sixth Circuit sided with Ohio and Tennessee on September 25.
The Sixth Circuit’s reasoning deserves precision. The CFTC’s published Federal Register proposal describes that panel as rejecting swap status, reasoning that the sports events lacked the required inherent financial, economic or commercial connection. That primary-source account does not describe a court accepting swap status and rejecting only preemption.
Three Supreme Court petitions are pending: 26-299, New Jersey’s Flaherty v. KalshiEX petition, and 26-338 and 26-344, brought by Robinhood and Crypto.com from the Nevada decisions. As of October 28, the Court has not granted review. A petition asks the justices to take a case; it is not an agreed hearing or a scheduled merits decision.
Kalshi’s response in the New Jersey matter is due November 9. On October 7, attorneys general from 39 states and the District of Columbia backed New Jersey’s petition. The NFL, American Gaming Association and 145 tribal governments and organizations also supported review. That coalition adds weight to the request without deciding whether the justices will accept it.
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The CFTC is trying to change the rulebook in parallel
The litigation is only one route. After its October 9 announcement, the CFTC published “Further Definition of ‘Swap’ — Inclusions” in the Federal Register on October 19, at 91 FR 66022, RIN 3038-AF82.
The proposal would add paragraph (2)(i)(G) to the swap definition in 17 CFR 1.3, expressly including event contracts tied to sports, politics, culture and weather. Written comments are due November 18. The comment period lets the public submit arguments and evidence for the agency’s rulemaking record; it is not a countdown to automatic adoption.
A companion interim final rule codifies the Commission’s position that casino-style gambling products, including sportsbook and casino-game wagers, remain outside the swap definition. The agency is therefore drawing a product boundary, not claiming every wager as a derivative.
A final inclusion rule could change the regulatory material courts must examine. It would not, merely by being published, resolve every statutory or preemption challenge. The pending proposal and the requests for injunctions remain separate proceedings with separate decision-makers.
For US traders, access and costs remain separate questions
For readers approaching Kalshi through Coinbase, Robinhood, Webull or Phantom, the practical issue is the entity offering the contract and the rules governing that particular route. An app’s familiar interface does not settle a state’s enforcement powers. Our Phantom and Kalshi coverage explains the distinction between software access and the regulated market behind it.
The same discipline applies to Polymarket: this Utah complaint is not a blanket authorization for every platform, affiliated business or product bearing the prediction-market label. Its requested protection concerns CFTC-regulated entities and their affiliates and partners. The scope of any actual order will matter more than the breadth of the industry’s reaction.
Fees and taxes introduce another distinction. A platform’s trading charge, a state’s exchange-wager levy and a customer’s tax reporting are separate questions. A victory against a state licensing requirement does not answer all three.
The Illinois litigation illustrates the point. As Holland & Knight explains on JD Supra, Judge Martha Pacold held on October 2 that Illinois’ sports-wagering licensing regime was likely preempted as applied to exchange-traded event contracts. She initially reserved the transaction-fee question. On October 8, the parties agreed further briefing was unnecessary because that fee applied only to licensees: blocking the licensing requirement also blocked the associated levy.
That outcome turned on the tax’s design. The parties preserved the question of a separate tax imposed independently of licensing. It provides no basis for treating prediction-market proceeds as tax-free or assuming that an exchange’s regulatory win eliminates the charges shown on an order ticket.
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Watch the orders, not the lawsuit count
- November 9: Kalshi’s response is due in Supreme Court docket 26-299. A response is a briefing milestone, not a grant of review.
- November 18: Comments close on the CFTC’s swap-inclusion proposal. Watch the subsequent agency action separately.
- Tenth Circuit appeal: Follow Kalshi’s pending Utah appeal for a merits decision, distinct from September’s emergency-relief denial.
- Supreme Court orders: Watch for action on petitions 26-299, 26-338 and 26-344. No grant has been announced as of this article’s date.
- New Utah case: Watch whether the federal district court grants preliminary relief and exactly which entities and enforcement actions any order covers.
Ten state suits show federal commitment. They do not produce ten victories, nationwide access or a Supreme Court hearing date. The next consequential document is an order defining who can enforce which law against which market.
Cover: Box Elder County Courthouse in Brigham City, Utah, photographed by David Guerrero. The county courthouse is an illustrative image, not the federal courthouse hearing this case.