CFTC sues Utah to block action against prediction markets

The US state filed a lawsuit against Kalshi last week, seeking to recover up to $60 million in profits related to event contracts on prediction markets.

The US Commodity Futures Trading Commission (CFTC) announced legal action against Utah officials after the state’s attorney general said he would sue to compel Kalshi and its affiliates to return up to $60 million in profits allegedly obtained illegally.

In a Monday filing in the US District Court for the District of Utah, lawyers for the commodities regulator sued the State of Utah and its Attorney General Derek Brown a week after officials announced legal action against prediction market platform Kalshi and its affiliates over allegedly illegal betting.

According to the CFTC, Utah was attempting to bypass congressional intent to “federally preempt state law” by “restrict[ing] the functioning of CFTC-registered exchanges.” CFTC Chair Michael Selig has been claiming for months that the regulator has “exclusive jurisdiction” over prediction markets, leading to several lawsuits between state and federal authorities.

“The event contracts targeted by Utah are ‘swaps’ under the federal [Commodity Exchange Act], and the exchanges that offer these event contracts for trading are CFTC-regulated Designated Contract Markets [DCMs],” said the lawsuit. “Utah’s efforts to prevent a CFTC-regulated DCM from offering CFTC-approved financial products intrude on the exclusive federal scheme Congress designed to oversee United States commodity derivatives markets.”

Kalshi spokesperson Jacki McGavick told Cointelegraph in response to the Utah lawsuit:

“As a national derivatives market overseen by the CFTC, Kalshi answers to federal law, and no single state should have a veto over it.“

The case is another dispute between federal and state authorities over prediction markets that may be resolved only by a Supreme Court decision. In September, New Jersey officials petitioned the high court to weigh in on their case against Kalshi, similar to other lawsuits pending in Michigan, Ohio, Kentucky, Nevada, Massachusetts, Wisconsin and New York. As of Tuesday, the Supreme Court has not announced whether it will hear arguments in the case.

Related: NBA names Kalshi, Polymarket preferred exchanges, signs CFTC deal

Subscribe to daily byte-sized crypto news from Cointelegraph

More on the subject