Kalshi Sues Utah to Block State Gambling Laws from Restricting Prediction Markets
Salt Lake City, Thursday, 26 February 2026.
Asserting federal preemption, Kalshi sued Utah officials on February 24, arguing its CFTC-regulated contracts are financial instruments, not the ‘illegal gambling’ Governor Spencer Cox claims they are.
Federal Authority vs. State Sovereignty
On February 24, 2026, Kalshi filed a lawsuit in U.S. District Court against Utah Governor Spencer Cox and Attorney General Derek Brown, seeking an injunction to prevent the state from taking enforcement action against its platform [2][3]. The New York-based exchange, which allows users to trade contracts on the outcomes of real-world events ranging from Federal Reserve nominations to jobless claims, argues that it operates under the exclusive jurisdiction of the Commodity Futures Trading Commission (CFTC) [1][3]. In its complaint, Kalshi asserts that because it is a federally regulated exchange, Congress has preempted individual states from classifying its financial products as illegal gambling, a designation Utah officials have aggressively applied to the industry [1][3].
Legislative Crackdown Continues
While the legal battle unfolds in federal court, Utah lawmakers are moving forward with legislation to codify the state’s opposition to these markets. Representative Joseph Elison, a Republican from Toquerville, is sponsoring House Bill 243, which aims to ban “proposition betting” [3]. The bill has already passed the Utah House of Representatives and is currently under consideration in the Senate [3]. Elison stated on February 25 that the lawsuit would not deter the legislative process, confirming, “The bill is not going to change… The lawsuit is going to move forward” [3]. Utah maintains a strict constitutional prohibition on gambling, which officials argue encompasses the event contracts offered by platforms like Kalshi [3].
A National Precedent in the Making
This dispute highlights a widening rift between state gaming regulators and federal commodities overseers. CFTC Chairman Mike Selig has staunchly defended the industry, asserting on February 17, 2026, that his agency holds full jurisdiction over prediction markets in the United States [2]. Selig has compared these wagers to speculative commodities contracts used by farmers, a comparison Governor Cox ridiculed at the POLITICO Governors Summit on February 19, calling the federal position a “joke” and distinguishing contracts on sports figures or political outcomes from commodities like soybeans and natural gas [5]. The CFTC formalized its position by filing an amicus brief on February 18 in a separate case involving Nevada, arguing that prediction platforms are commodities markets subject to sole federal oversight [5].