US Commodities Regulator Sues Utah, Pursues 9 Other States Over Prediction Markets
Key Facts
The US Commodity Futures Trading Commission said on October 27, 2026, that it had sued Utah to prevent the state from using its laws to shut down markets for contracts registered with the commission, after the complaint was filed on October 26, according to open coverage of the case file. The commission says the lawsuit was prompted by civil proceedings Utah brought in state court against commission-regulated markets and other companies. The government and the commission are seeking preliminary and permanent injunctions covering investigations and enforcement of laws related to transactions on those markets, according to coverage of the complaint. The move brings a dispute over the limits of authority between the federal regulator and the state before the courts, as the commission also takes legal action against other states. The lawsuit names Utah and Attorney General Derek Brown, in his official capacity, as defendants, and is registered in federal court under case number 2:26-cv-01055.
Utah began its civil case before the federal lawsuit: the attorney general’s office announced on October 20, 2026, that it had filed a lawsuit against Kalshi and related entities in state court. The United States and the commission then filed their federal complaint on October 26, before the commission announced it the following day. Both proceedings concern the same question: Can the state apply its laws to markets the commission says are registered with it, or do those markets remain within the scope of federal regulation? The complaint seeks to halt investigations and enforcement of laws related to transactions on registered markets, according to open coverage of the case. Utah’s civil action against Kalshi and related entities is proceeding in state court.
Commission Chairman Michael Selig defends the role of these contracts in markets, saying they "serve not only hedging and investment purposes, but also provide the public with information about the outcomes of future events." The position presents event contracts as instruments that may serve an informational function alongside their use for hedging and investment. The commission says registered markets are subject to regulatory requirements that include monitoring trading and preventing manipulation and insider trading. It also says prices reflect traders’ estimates of the likelihood that an event will occur. The dispute in Utah, by contrast, centers on whether these activities are subject to the state’s anti-gambling laws.
The current legal confrontation does not begin on a blank slate: on August 4, 2026, a federal judge ruled in Utah’s favor in an earlier lawsuit brought by Kalshi. The ruling concluded that the Commodity Exchange Act does not prevent the state from enforcing its anti-gambling laws against the platform. That puts an earlier court decision alongside the new lawsuit filed by the commission and the federal government. The Associated Press described the legal landscape as mixed, with courts blocking restrictions in some states and allowing them in others. The divergence means the dispute extends to differences in how courts apply state and federal law to prediction markets.
The commission’s actions have extended beyond Utah: it said it had initiated legal proceedings against 9 other states and filed briefs before 4 federal appeals courts and one state supreme court. This comes alongside Utah’s restrictions on certain types of sports bets, as state law prohibits in-game, or “micro,” bets on individual events during a game. The Associated Press reported that these bets are a significant source of revenue for leading prediction markets. One point of contention is how event contracts are classified: do they fall under the financial products regulated by the commission, or among activities that states can restrict under gambling laws? The commission says registered markets operate under federal regulatory rules, while the limits of states’ authority remain subject to litigation.
The court proceedings are unfolding alongside federal regulatory action: on October 9, 2026, the commission published a proposal aimed at clarifying that the definition of a “swap” includes event contracts tied to sports, politics, culture and weather. The commission requested written comments within 30 days of the notice’s publication in the Federal Register. Its statement did not set a calendar date for the comment deadline, linking the period to the publication date in the register. The federal case still awaits consideration of the injunctions sought by the government and the commission, while Utah’s proceedings continue in state court. EL7 previously covered the commission’s lawsuit against New Mexico on June 15, 2026, as part of a series of legal disputes tied to prediction markets.