Federal financial regulators have deepened their jurisdictional fight over fast-growing prediction markets, filing a lawsuit against Utah on Tuesday to block the state from clamping down on the industry giant Kalshi. The legal action represents the Commodity Futures Trading Commission’s tenth lawsuit against a state attempting to regulate prediction platforms, and its first direct challenge against a state led by a Republican governor.
The conflict centers on a fundamental disagreement over authority. The CFTC, led by Chair Michael Selig, maintains that prediction market platforms operate as federally regulated financial exchanges and fall exclusively under federal oversight. Conversely, state officials argue that these platforms function as modern gambling operations and should remain subject to state-level enforcement.
The federal lawsuit was prompted by legal action Utah initiated against Kalshi the previous week. Utah authorities filed suit alleging that the platform operates an illegal gambling business within state borders, an accusation that the company denies.
“Utah seeks to shut down prediction markets across a wide variety of markets,” Selig said in a statement released Tuesday. “Congress entrusted the CFTC to be the federal regulator with sole responsibility to oversee these markets. 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.”
Representatives for Utah Governor Spencer Cox and Attorney General Derek Brown did not immediately respond to requests for comment regarding the federal lawsuit. However, Governor Cox expressed sharp opposition to federal oversight earlier this year during a public appearance, dismissing the idea that the CFTC should hold exclusive regulatory power over the platforms as “a joke.”
Meanwhile, Kalshi representatives defended their operational status under federal rules. Jacki McGavick, a spokesperson for the company, stated that the platform answers strictly to federal law as a federally regulated financial exchange and asserted that individual states should not hold veto power over its operations.
The broader regulatory battle has national implications for the expanding financial industry. The Supreme Court is currently considering a separate petition by New Jersey officials seeking to address the regulatory authority over prediction markets, as federal agencies and state governments continue to vie for control across the country.
