A federal judge in Utah has determined that the Commodity Exchange Act (CEA) does not supersede the state’s gambling regulations, permitting Utah to apply its gambling laws against Kalshi’s sports prediction markets, marking a significant setback for the federally regulated platform.
Judge Robert J. Shelby rejected Kalshi’s motion for a preliminary injunction, issued a summary judgment favoring Utah officials, and ordered the closure of the case. The verdict countered Kalshi’s assertion that the Commodity Futures Trading Commission’s (CFTC) exclusive jurisdiction over federally regulated derivative markets obstructs states from enforcing regulations on its event contracts as per the Supremacy Clause of the U.S. Constitution.
Kalshi initiated legal action against Utah in February, naming Governor Spencer Cox and Attorney General Derek Brown as defendants, contending that the state was poised to impede its federally sanctioned sports event contracts. The company argued that Utah’s regulatory actions would interfere with the federal authority to oversee derivative trading on CFTC-regulated exchanges.
Judge Shelby concluded that the CEA does not explicitly or implicitly override Utah’s gambling regulations, asserting that state enforcement of gambling laws can exist concurrently with federal commodities oversight. The judge noted that the jurisdictional framework of the CEA “strongly indicates that there is space for state regulation” alongside federal jurisdiction.
Furthermore, the judge dismissed Kalshi’s claims regarding field and conflict preemption, finding no conflict between Utah’s gambling statutes and federal regulations governing designated contract markets. Kalshi argued that Utah could compel it to restrict access for state residents, despite federal mandates advocating for unbiased market access, and asserted that varying state gambling laws would threaten Congress’ intention to establish a uniform national derivatives market.
In March, Utah bolstered its legal stance by enacting H.B. 243, which incorporated prediction market proposition bets into the state’s definition of gambling. According to Utah law, providing online gambling services is categorized as a third-degree felony.
The ruling highlighted that Kalshi’s sports contracts encompass markets associated with victory margins, losing streaks, player or team touchdowns, and even the identity of the Super Bowl halftime performer.
Utah Attorney General Derek Brown applauded the verdict: “You can’t reframe illegal gambling as a federal commodity, and today a federal judge concurred with us.”
“Kalshi wagered that clever branding could outsmart Utah law. Kalshi lost, while Utah triumphed,” Brown added. “Utah’s constitution prohibits gambling to safeguard Utah families, and my office will uphold that prohibition. Gambling remains gambling, regardless of how companies label it.”
Governor Spencer Cox endorsed the ruling: “Prediction markets qualify as gambling, period. They inflict considerable damage to numerous American families.”
“Today’s ruling confirms that Utah’s anti-gambling regulations effectively protect our citizens and are not overridden by federal law,” Cox remarked, expressing his eagerness to collaborate with Brown “to shield Utah families.”
Legal analyst Daniel Wallach indicated that Kalshi is anticipated to appeal the ruling to the U.S. Court of Appeals for the Tenth Circuit, prolonging legal disputes over sports prediction markets to seven of the thirteen federal judicial circuits. He noted that further involvement from the Seventh and Eighth Circuits is also likely for similar appeals.
This decision has already been referenced by the New York Attorney General’s Office as supplementary authority in its independent case against Kalshi and represents another judicial hurdle for the firm as various states question whether its sports prediction markets amount to unlawful gambling.