After Utah sued Kalshi, alleging it offered illegal gambling, the CFTC has also taken the state to court, escalating the jurisdictional battle over oversight of the platforms.
According to The Block, the U.S. Commodity Futures Trading Commission (CFTC) filed a lawsuit against Utah and state Attorney General Derek Brown in federal court on Tuesday. The agency argues that Utah has intervened in prediction markets, encroaching on the federal regulator’s jurisdiction.
At the heart of the dispute is who will oversee platforms where users can trade on the outcomes of events such as sports matches and elections. The CFTC treats these contracts as part of the derivatives markets it oversees, while states maintain that they retain the authority to enforce gambling and sports betting laws.
Utah says “illegal gambling,” CFTC says “jurisdictional overreach”
In its lawsuit against Kalshi, Utah alleged that the platform violated the state’s gambling laws by offering trading on sports, elections, and politics. The state also argued that the activities have caused its residents serious and ongoing harm.
CFTC Chair Michael Selig said Congress designated the CFTC as the sole federal agency authorized to oversee these markets. Selig said the agency would continue to defend its exclusive authority over commodity derivatives.
Lawsuits against states reach 10
With the Utah case, the number of lawsuits the CFTC has filed against states asserting the same jurisdictional claim has risen to 10. The agency had previously initiated legal proceedings against Arizona, Connecticut, Illinois, New York, Wisconsin, Minnesota, Rhode Island, New Mexico, and Kentucky.
The states argue that the platforms illegally offer sports betting within their jurisdictions and avoid paying taxes. The jurisdictional dispute, now being debated in different courts, could eventually reach the U.S. Supreme Court.
The Utah Attorney General’s Office did not immediately respond to a request for comment on the report. Reuters also reported that same day that the CFTC is investigating whether Polymarket has complied with its obligation to block U.S. users from its offshore platform; the investigation concerns a separate matter under a 2022 settlement.
Not investment advice.