Kalshi, an online prediction market platform, has filed a lawsuit in federal court against Utah Governor Spencer Cox, Attorney General Derek Brown, and other state officials, claiming the state is preparing to block its operations in Utah. The legal battle centers around the question of whether prediction markets, such as Kalshi’s platform, are subject to state anti-gambling laws, or whether they fall under the federal jurisdiction of the Commodity Futures Trading Commission (CFTC).

In its complaint filed on Monday in the U.S. District Court for the District of Utah, Kalshi argues that state officials are infringing on the federal government’s exclusive authority to regulate prediction markets. The lawsuit is a response to Utah’s public statements and recent actions regarding the growing use of prediction markets in the state. Kalshi is seeking a preliminary injunction, permanent injunction, and declaratory relief to stop Utah from interfering with its operations.

State Actions and the Growing Legal Debate

Kalshi’s lawsuit stems from comments made by Utah officials, including Governor Cox, who recently criticized prediction markets. As reported by Event Horizon, in a post on social media, Sen. John Curtis expressed his belief that these platforms are forms of gambling, stating, “sports prediction markets are gambling, and gambling is regulated by states, not the @CFTC.” He further emphasized Utah’s commitment to keeping such services out of the state. Similarly, Attorney General Derek Brown has published an op-ed calling prediction markets a form of betting disguised as futures trading. Kalshi cites these public comments as evidence of Utah’s intent to regulate its platform, which it believes violates federal preemption laws.

Kalshi operates by allowing users to place bets on real-world events by trading contracts for or against specific outcomes, such as sports results or political events. While the platform is regulated by the CFTC, Utah’s officials contend that such activities fall under state laws regarding gambling and wagering. Kalshi’s legal team argues that Utah’s actions would conflict with the federal framework established for regulated exchanges, specifically the CFTC’s jurisdiction over event contracts.

The state’s current legal stance on gambling only permits certain forms of wagering. Utah is known for its strict anti-gambling laws, which extend to a ban on any real-money gambling activities. However, the state has not officially issued a cease-and-desist order to Kalshi or other prediction market platforms, although the company believes enforcement is imminent.

Kalshi’s Legal Precedent

This legal dispute is not the first time Kalshi has faced opposition from state authorities. Over the past year, Kalshi has taken legal action against other states, including Nevada, Maryland, and Tennessee, after receiving cease-and-desist orders related to its prediction market activities. While Kalshi has often initiated these lawsuits, the Utah case represents a significant escalation, as it follows public statements from state officials about taking action against prediction markets.

Kalshi argues that its business model does not fall under state-regulated gambling because it operates under the legal framework for derivatives trading overseen by the CFTC. The platform allows users to trade in “yes/no” contracts on real-world events, with each side of the contract having an opposite outcome. Users are essentially trading predictions, rather than betting against the house, which Kalshi claims differentiates it from traditional gambling.

Despite its legal victories in other states, Kalshi continues to face challenges as it navigates an evolving regulatory landscape. The outcome of the Utah case will likely have broad implications for the future of prediction markets and could set a precedent for how states interact with federally regulated platforms.

As Kalshi’s lawsuit against Utah progresses, the broader debate about the legal status of prediction markets continues to unfold. The CFTC has expressed its commitment to protecting the integrity of prediction markets, with CFTC Chairman Michael Selig recently stating, “The CFTC will no longer sit idly by while overzealous state governments undermine the agency’s exclusive jurisdiction.” This statement highlights the increasing tension between federal oversight and state-level regulation of prediction markets, as states seek to regulate what they consider to be forms of gambling.