The US and the CFTC sue Utah to stop its Kalshi case, and ask a judge to bar even investigations

The United States and the Commodity Futures Trading Commission (CFTC) sued the State of Utah and its attorney general, Derek Brown, in federal court in Salt Lake City on Monday 26 October. They want a judge to stop Utah’s civil case against Kalshi and two Susquehanna trading firms, and to bar the state from even investigating CFTC-regulated exchanges and their partners. The CFTC announced the suit on Tuesday 27 October in press release 9315-26; the 33-page complaint carries case number 2:26-cv-01055 in the District of Utah.

Washington moved barely a week after the state went to its own courts. On 20 October Brown filed a civil action in Salt Lake County against five Kalshi entities and the market makers Susquehanna International Group and Susquehanna Government Products. Until now Kalshi fought Utah alone. This time the United States is the plaintiff: the Justice Department’s Civil Division is on the complaint alongside the CFTC’s general counsel, Tyler Badgley, and his team.

Utah is the tenth state the federal government has taken to court over prediction markets, by the complaint’s own list. Kalshi and Susquehanna are not parties to it. The defendants are the State of Utah and Brown, in his official capacity.

“Utah seeks to shut down prediction markets across a wide variety of markets,” CFTC Chairman Michael Selig said in the release. He added: “Congress entrusted the CFTC to be the federal regulator with sole responsibility to oversee these markets.” Utah had not answered publicly by about 18:00 UTC on Tuesday, and neither had Kalshi or Susquehanna.

One count: the Supremacy Clause against Utah’s gambling laws

The complaint makes a single claim under the Supremacy Clause of the Constitution, the rule that valid federal law beats state law when the two collide. It argues the point three ways.

The first is express preemption. The Commodity Exchange Act gives the CFTC “exclusive jurisdiction” over swaps and futures traded on a designated contract market (DCM), and the government says the event contracts Utah targets are swaps under the Act’s definition. The second is field preemption: Congress built a full federal scheme for these markets and left no room for states. The third is conflict preemption, the claim that obeying Utah law and federal law at the same time is impossible. The example the complaint gives is a CFTC rule requiring exchanges to offer “impartial access” to eligible participants nationwide; shutting Utah residents out, it says, would break that rule.

The complaint names the Utah laws it wants set aside as applied to CFTC-regulated exchanges: the gambling chapter of the criminal code (sections 76-9-1401 to 1408), the ban on election wagers (section 20A-1-606), the public nuisance statute and Utah common law. Those are the tools Brown used on 20 October.

The government also argues that the harm is “irreparable”. If Utah is allowed to enforce its gambling laws against these markets, the complaint says, the harm to federal interests could not be undone after a final judgment.

CFTC sues Utah and asks a judge to stop investigations too

Most coverage on Tuesday stopped at the headline. The relief section goes further. The United States and the CFTC ask the court for:

• a declaration that Utah’s laws are preempted and invalid as applied to transactions listed, offered or executed on CFTC-regulated DCMs;
• a preliminary and then permanent injunction barring Utah, its agents and employees from investigating CFTC-regulated entities “and their affiliates and partners” under those laws, or from enforcing them;
• costs and fees, and any other relief the court finds just.

The word “partners” matters here. In Utah’s case the defendants include Susquehanna, which Utah describes as a market maker on Kalshi. A federal order in the terms the CFTC wants would also cover firms that are not exchanges at all. Paragraph 9 of the complaint says the pending Kalshi action and “any future enforcement actions or investigations” against federally regulated DCMs and related entities must be enjoined immediately.

Federal lawyers also warn that Utah’s action “threatens to wipe out the operation of CFTC-regulated exchanges within the State”. That is the government’s claim. No judge has ruled on any of it, and the release does not say whether a separate motion for a preliminary injunction has been filed.

What Utah filed on 20 October

We covered Utah’s case in detail when Utah sued Kalshi and the two Susquehanna firms, so only the parts the federal complaint relies on are repeated here. Brown v. Kalshi (No. 260908356, Third District Court, Salt Lake County) alleges that the defendants began offering gambling bets to Utah residents “by at least September 2024”. It asks the state court to bar event contracts in Utah in categories that include sports, elections, politics, culture and “mentions”, and seeks restitution, disgorgement and damages.

Utah’s own figure for the fees Kalshi took from Utah accounts runs from $30.6 million to $61.2 million, according to that complaint as reported at the time. The federal suit does not dispute the numbers. It disputes Utah’s right to bring the case at all.

Ten states sued since April, three injunctions for the federal side

Washington presents the Utah suit as part of a campaign. The release says the agency has started proceedings against nine other states and filed briefs in four federal courts of appeals and one state supreme court. The complaint lists those nine cases with their dates, which gives a timeline of the fight.

Two of the listed wins came in cases the federal government did not start. The Arizona injunction was granted in Kalshi’s own suit, and the Illinois one in a case brought by Coinbase Financial Markets, the derivatives arm of Coinbase. The complaint counts them in the federal tally all the same.

It also points to the Third Circuit, which in KalshiEX v. Flaherty sided with Kalshi against New Jersey. That ruling is now in front of the Supreme Court, where New Jersey has asked the justices to hear the case (docket 26-299). The Court has not said whether it will.

The suit lands in the courthouse where Utah already beat Kalshi

The new case is filed in the same federal district where Kalshi lost to Utah this summer. As we reported on 21 October, Judge Robert J. Shelby granted Utah summary judgment on 4 August in Kalshi’s own suit, finding that federal commodities law does not override Utah’s gambling law for Kalshi’s sports contracts. On 8 September the Tenth Circuit refused Kalshi an injunction while it appeals, without deciding the preemption question.

So the federal government is asking a court in Utah to reach a result that a judge in the same court rejected less than three months ago, this time with the United States as plaintiff. Which judge gets the new case has not been reported. Any appeal would go to the Tenth Circuit, the court already holding Kalshi’s appeal.

The wider picture is split. The Third Circuit backed Kalshi in April. A unanimous Sixth Circuit panel went the other way on preliminary relief on 25 September in cases from Ohio and Tennessee, as we reported at the time. The CFTC’s own tally lists only its wins, which is what a party to a lawsuit does.

The CFTC’s case that it already polices prediction markets

A large part of the complaint answers the states’ main argument, that nobody is watching these markets. It says 30 exchanges in the United States hold an active CFTC designation as a contract market, Kalshi among them.

It then lists enforcement. According to the complaint, the agency sued a US servicemember who allegedly traded event contracts on the ouster of Venezuelan President Nicolás Maduro with nonpublic information (April 2026), and a Google employee accused of trading on the company’s Year in Search list (May 2026). The Justice Department brought criminal charges in both matters. The agency also cites penalties against former Congressman George Santos (31 July) and a teleprompter operator, Gabriel Perez (28 August), and a staff advisory of 22 September warning that “mention” contracts carry a heightened risk of manipulation.

The last item on the list is the leagues. The complaint cites the information-sharing agreements the CFTC signed with Major League Baseball, the National Hockey League and, on 26 October, the National Basketball Association. That NBA pact came one day before the Utah suit was announced; we covered it, and the NFL’s support for the states at the Supreme Court, in our piece on the NBA and CFTC agreement.

Why crypto traders are watching a fight over sports bets

The suit is about gambling law, not about crypto. But the venues it protects are where a growing share of crypto speculation now happens. Crypto event contracts on Kalshi and Polymarket reached a reported $2.7 billion of notional volume in a single week, a figure traced to a Dune dashboard, as we reported on 24 October. On Kalshi, about 86% of September’s crypto volume came from 15-minute up-or-down markets, by DeFi Rate’s count. Wallets and brokers such as Phantom, Coinbase and Robinhood now route users to these markets.

If states can shut a DCM’s contracts down one by one, crypto contracts on the same exchange sit in the same legal grey zone, even when no state targets them by name. Utah’s complaint goes after categories (sports, elections, culture, mentions), not crypto prices. A federal win would keep the exchange open; it would say nothing about whether any particular bitcoin contract is a good trade.

Event contracts and preemption, in plain words

An event contract pays out depending on whether something happens: a team wins, a candidate is elected, bitcoin closes above a level. On a CFTC-designated exchange it is treated as a derivative, and the exchange answers to federal rules on surveillance, clearing and customer funds. States see many of the same products as bets, which they license or ban themselves.

Preemption is the legal question in the middle: when Congress hands a federal agency exclusive power over a market, can a state still apply its own laws to it? Our pages on Kalshi, the CFTC-regulated prediction market and Polymarket, the other large prediction market explain how each platform is regulated. Polymarket’s history is part of the CFTC’s argument too: the complaint recalls the 2022 order that fined it and pushed it out of the US for offering swaps without registration.

What is not known yet, and the dates to watch

Several basic facts were missing on Tuesday evening. No judge assignment or hearing date has been reported. No separate motion for a preliminary injunction had been reported either. The federal suit does not freeze Utah’s state case by itself, and whether Utah will press on with it, or Kalshi will try to move it, has not been reported.

Utah’s leaders have made their view clear before. Governor Spencer Cox wrote on X on 17 February that prediction markets are gambling, “pure and simple”, Gizmodo reported, and vowed to spend state resources in court to block them. Brown has not commented on the federal complaint.

The next fixed date is in Washington, not Salt Lake City. Kalshi’s reply in the New Jersey case at the Supreme Court is due on 9 November, after which the justices can decide whether to take up the question that ten federal lawsuits now turn on.