CFTC sues Utah as battle over prediction market regulation intensifies

The Commodity Futures Trading Commission is escalating its legal fight with states, suing Utah after the state filed a lawsuit against prediction market platform Kalshi, alleging it offered illegal gambling to residents.

On Tuesday, the federal regulator filed a lawsuit in the U.S. District Court for the District of Utah, Central Division, against the state and its Attorney General Derek Brown, and said the state was intruding on its jurisdiction over prediction markets.

"Congress entrusted the CFTC to be the federal regulator with sole responsibility to oversee these markets," said CFTC Chair Michael Selig in a statement. "As I've said before, the CFTC has the expertise and responsibility to defend its exclusive jurisdiction over commodity derivatives, and that's exactly what we'll do."

The CFTC's lawsuit now marks its tenth against a state for what it says is impeding its "exclusive jurisdiction" following Arizona, Connecticut, Illinois, New York, Wisconsin, Minnesota, Rhode Island, New Mexico and Kentucky. Under the Trump administration, Selig has sought to assert the agency's oversight over prediction markets through lawsuits, but also through rulemaking. However, states have pushed back, saying that they have jurisdiction over sports betting and that platforms are operating illegally and are avoiding paying taxes.

In its lawsuit against Kalshi, Utah said the platform was a "public nuisance that is causing substantial ongoing harm" to its residents and was violating its gambling laws, including when it comes to betting on sports, elections, and politics. The issue of whether the CFTC or states have jurisdiction over prediction markets has bounced around among state courts and could make its way up to the Supreme Court.

 The Utah Attorney General's office did not immediately respond to a request for comment.

Also on Tuesday, Reuters reported that the CFTC is investigating Polymarket over whether it violated a deal made in 2022 to promise to ban U.S. users from its flagship overseas platform. In 2022, under the Biden administration, as part of a settlement with the CFTC over offering its contracts without being registered, the platform agreed to stop offering its contracts to people in the U.S.