CFTC sues Utah to protect Kalshi's prediction markets

The US Commodity Futures Trading Commission has sued Utah to stop the state from shutting down Kalshi's prediction markets there, escalating a fight over who gets to regulate event contracts. The agency announced the federal lawsuit on Tuesday, a week after Utah's attorney general moved to restrict Kalshi from offering its contracts to residents, CoinDesk reports.

What the CFTC is asking for

• The target: Utah Attorney General Derek Brown's enforcement effort launched last week against Kalshi.
• The argument: federal commodities law gives the CFTC exclusive authority over event contracts traded on the exchanges it regulates, so state gambling laws should not apply to them.
• The stakes for Utah: gambling is banned by the state constitution. Brown said last week that anyone offering gambling to Utahns "is on notice that it is illegal in Utah" and accused Kalshi of running an online casino.

CFTC Chairman Mike Selig defended the contracts in a statement, saying they "provide the public with information about the outcome of future events" as well as serving hedging and investment purposes. If you are new to the products, our guide to prediction markets explains how event contracts are priced and settled.

A patchwork of rulings

Utah has so far had the upper hand: a US district judge sided with the state against Kalshi, and that decision is under appeal. Nationally the picture is split. Three federal appeals courts have ruled on the question, two in favour of the states and one in Kalshi's favour, which makes a Supreme Court showdown more likely.

According to CoinDesk, the CFTC is now litigating against 10 states and has taken part in more than a dozen legal actions to defend its position, despite cuts to its legal staff. Earlier this month Crypto.com and Novig took Missouri to federal court over a similar order.

The other side of the argument

Not everyone who wrote the rules agrees with Selig. Former CFTC chair Gary Gensler, later head of the SEC, told the Supreme Court in a brief that the Dodd-Frank Act "did not transfer jurisdiction over sports betting from the states to the CFTC." Former senator Chris Dodd, one of the law's authors, filed a brief backing the states as well.

The case matters for crypto too: bitcoin price contracts drove a record .7 billion week for Kalshi and Polymarket earlier this month.