CFTC and Justice Department sue Utah to stop gambling-law case against Kalshi and Susquehanna

The United States and the Commodity Futures Trading Commission have sued Utah and Attorney General Derek Brown in federal court, six days after the state sued Kalshi entities and Susquehanna in state court. The federal complaint asks for a declaration that Utah's gambling laws are preempted as applied to CFTC-regulated exchanges, and for injunctions barring the state from investigating or enforcing against those markets.

By Teresa Domingo27 Oct 2026Updated: 27 Oct 2026

3 Min Read

CFTC Chairman Michael S. Selig — Photo: CFTC (public domain)

Overview

The United States and the CFTC filed a complaint for declaratory and injunctive relief against the State of Utah and Attorney General Derek Brown, in his official capacity, in the US District Court for the District of Utah on October 26, 2026 (Case No. 2:26-cv-01055). The CFTC announced the suit on October 27.
The case responds to Utah's October 20 state-court action, Brown v. Kalshi Inc., et al. (No. 260908356, Third Judicial District Court, Salt Lake County), against Kalshi Inc., KalshiEX LLC, Kalshi Klear Inc., Kalshi Klear LLC, Kalshi Trading LLC, Susquehanna International Group LLP and Susquehanna Government Products LLLP.
The federal complaint has a single count under the Supremacy Clause. It argues that the event contracts Utah targets are swaps under the Commodity Exchange Act, over which the CFTC has exclusive jurisdiction.
The plaintiffs ask the court to declare Utah's laws preempted "as applied to transactions listed, offered, or executed on CFTC-regulated DCMs", and to issue preliminary and permanent injunctions barring Utah from investigating CFTC-regulated entities "and their affiliates and partners" or enforcing state law against those transactions.
Kalshi and its affiliates are not parties to the federal case. The complaint names them as non-parties.

What the CFTC is asking the court to stop

According to the federal complaint, Utah's state case alleges that the Kalshi defendants began offering "gambling bets" to Utah residents by at least September 2024, and that Kalshi's offering is "indistinguishable from the bets offered by a traditional sportsbook." The state brings claims under several gambling provisions of the Utah Code, an election-wagering provision (§ 20A-1-606(2)) aimed at Kalshi Trading and the two Susquehanna entities as market makers, and a public-nuisance claim. It seeks restitution, damages, disgorgement and punitive damages, and asks the court to enjoin contracts in categories including elections, politics, culture, sports and mentions.

The federal plaintiffs say Kalshi is a designated contract market (DCM) approved by the CFTC in November 2020, and that Utah's action "threatens to wipe out the operation of CFTC-regulated exchanges within the State." They ask for an injunction against the pending state case and "any future enforcement actions or investigations against federally regulated DCMs and related entities."

"Utah seeks to shut down prediction markets across a wide variety of markets," CFTC Chairman Michael S. Selig said in the agency's announcement. "Congress entrusted the CFTC to be the federal regulator with sole responsibility to oversee these markets."

Utah joins a list of ten states

The CFTC said it has initiated legal proceedings against nine other states. The complaint lists preemption actions against Arizona, Connecticut, Illinois, Kentucky, Minnesota, New Mexico, New York, Rhode Island and Wisconsin, and says preliminary injunctions have been entered against state enforcement in Arizona, Illinois and Minnesota.

The complaint also cites the CFTC's October 19, 2026 Federal Register rule that further defines "swap" so that state-regulated gambling is not treated as one, its integrity agreements with the NBA, MLB and NHL, and its enforcement cases over insider trading on event contracts.

The complaint was signed for the United States by the Justice Department's Civil Division and for the CFTC by General Counsel Tyler S. Badgley. The court has not ruled on the complaint, and the filing does not by itself pause Utah's state-court case.

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Teresa Domingo

Teresa Domingo is an editor at AskSpinner News, turning fresh iGaming insights into engaging, accessible content. Teresa’s writing connects the latest developments with the stories behind them, aiming to give busy industry readers both a timely update and a new idea worth following.