Kalshi Files Preemptive Federal Lawsuit Against Utah Amid Escalating Political Pressure

Kalshi has filed a preemptive lawsuit against Utah state officials — despite the lack of enforcement action — arguing that public threats from Gov. Spencer Cox and Attorney General Derek Brown create an imminent risk of prosecution under the state’s anti-gambling laws.

The complaint, filed February 23 in the U.S. District Court for the District of Utah, seeks declaratory and injunctive relief barring the state from applying Utah gambling statutes to the CFTC-regulated exchange.

In the complaint, the company states:

“Plaintiff KalshiEX LLC (‘Kalshi’ or ‘Plaintiff’) believes the Governor of Utah … and the Attorney General’s Office of Utah … will imminently bring an enforcement action against Kalshi with the intent to prevent Kalshi from offering event contracts for trading on its federally regulated exchange.”

The move comes as Utah lawmakers advance HB243. The bill would expand the definition of gambling to include proposition betting and target sweepstakes games, while senior state officials publicly describe prediction markets as unlawful.

No Enforcement — But Escalating Rhetoric

The Utah lawsuit differs from litigation in Nevada, Maryland, and Tennessee. Utah has not filed suit, issued a cease-and-desist order, or initiated criminal proceedings.

Unlike other states, Utah has not filed enforcement actions, but Kalshi argues that enforcement is imminent and seeks to block it before it occurs. The filing cites multiple public statements by Gov. Cox, including:

“I think you’re going to see 50 states suing these guys in one way or another.”

and

“It’s illegal in Utah and will continue to be so.”

Responding to CFTC Chair Michael Selig’s defense of prediction markets and the agency’s support of Crypto.com in Nevada litigation, Cox wrote on X:

“I don’t remember the CFTC having authority over the ‘derivative market’ of LeBron James rebounds. These prediction markets you are breathlessly defending are gambling—pure and simple.”

He added,

“Let me be clear, I will use every resource within my disposal as governor of the sovereign state of Utah, and under the Constitution of the United States to beat you in court.”

Attorney General Brown has echoed that framing. In a recent Desert News op-ed, Brown wrote:

“Betting. Wagering. Trading on futures. A wolf in sheep’s clothing is still a wolf.”

During testimony on HB 243, Brown told lawmakers that prediction markets are, in his view, gambling.

In its complaint, Kalshi says it attempted to get clarification from the Attorney General’s office on possible enforcement actions, but “was met with silence”, despite prior communication between the parties.

Kalshi argues that the combination of public declarations and lack of response makes enforcement action imminent.

Legislative Context: HB243 and Utah’s Gambling Crackdown

While Utah prohibits gambling under its constitution, lawmakers are advancing HB 243, which clarifies that proposition betting falls within that ban and tightens definitions around “fringe gambling.”

Sponsored by Rep. Joseph Elison, the measure could impact sweepstakes casinos by narrowing exemptions for promotional sweepstakes and amusement devices, limiting permissible rewards to non-monetary prizes, and excluding cash, gift cards, and any other rewards redeemable for money.

On prediction markets, Elison told the Utah News Dispatch:

“It’s a huge gray area and there’s lots of lawsuits all over the country right now … debating this very thing, trying to find out what are the actual definitions.”

“They’re flying under what’s called prediction markets, and prediction markets are regulated by the Federal Commodities Exchange. That’s why they’re able to do it.”

HB 243 does not directly address prediction markets. Still, it underscores Utah’s broader effort to narrow gambling carve-outs — the backdrop against which Kalshi argues enforcement risk is imminent.

The Federal Preemption Argument

The complaint reiterates Kalshi’s core position: that the Commodity Exchange Act grants the CFTC “exclusive jurisdiction” over trading on federally regulated exchanges. It further cites the CFTC’s view that “due to federal preemption, event contracts never violate state law when they are traded on a DCM.”

Kalshi argues that any attempt by Utah to regulate it would be preempted under express, field, and conflict preemption principles.

The company is seeking declaratory relief and both preliminary and permanent injunctions blocking enforcement.

How Utah Fits Into the Broader State Fight

Utah is not the first state to clash with Kalshi — but it is procedurally distinct.

In Tennessee, regulators issued a cease-and-desist letter to which Kalshi responded with a lawsuit. Last week, a federal judge granted a preliminary injunction. It found that Kalshi was likely to succeed on its argument that its sports event contracts qualify as “swaps” under the Commodity Exchange Act and fall within the CFTC’s exclusive jurisdiction.

By contrast, courts in Maryland and Nevada have allowed state enforcement actions to proceed at the preliminary stage, declining to fully side with Kalshi’s federal preemption theory.

Utah stands out by comparison.

Unlike other states, Utah has neither issued a cease-and-desist order, filed suit, nor brought criminal charges. Instead, the escalation has been political: public statements from the governor and attorney general declaring prediction markets illegal.

That might be a key difference.

In Tennessee, the issue was whether the state could enforce. In Utah, the question is whether a court will intervene before any potential enforcement.

Before reaching the preemption issue, the court must determine whether the case is ripe, as Utah has not taken a formal action. Kalshi argues it should not have to wait for formal charges — especially as Utah law exposes it to felony penalties and senior officials have publicly signaled enforcement.

Utah, in turn, may argue the lawsuit is premature.

If the court grants relief without a formal enforcement step, it would expand Kalshi’s ability to seek federal protection based solely on credible threats. If it declines to intervene, Utah could signal that rhetoric — even from a governor and attorney general — is insufficient to trigger federal preemption review.

Either way, Utah now represents the next front in the growing state-versus-federal debate over prediction markets.