The Commodity Futures Trading Commission and Justice Department asked a federal judge Thursday to block Utah from moving forward with its criminal and civil cases against Kalshi.
The motion seeks a temporary restraining order and preliminary injunction barring Utah from enforcing its gambling laws against event contracts on prediction markets, including the cases already filed.
The request came one day after Utah Atty. Gen. Derek Brown filed 14 criminal charges against Kalshi and co-founders Tarek Mansour and Luana Lopes Lara for illegally promoting online gambling.
“Pursuing draconian criminal and civil penalties on an unsettled legal theory that is currently winding through the courts crosses the line,” the agencies wrote. “The State’s civil and criminal enforcement actions must be enjoined immediately.”
The criminal charges against Kalshi were followed by DraftKings Predictions and FanDuel Predicts pulling sports contracts in Utah, with Fanatics Markets stopping all trades on Nov. 4.
CFTC keeps argument consistent
The CFTC and the Justice Department acknowledged that a federal judge denied Kalshi a preliminary injunction in August. Despite that ruling, the agencies argue Utah’s criminal charges go too far, calling them “unprecedented.”
“As Utah’s recent actions lay bare, there is simply no way to reconcile federal and state law,” the agencies wrote. “A state cannot criminalize trading in a class of contracts over which a federal regulator has ‘exclusive jurisdiction.’”
The CFTC and Justice Department repeated their arguments that event contracts are “swaps” under the Commodity Exchange Act. Therefore, states have “no ‘jurisdiction’ to regulate those transactions, much less prosecute them as felonies.”
The motion also argues the federal government is “irreparably harmed by Utah’s actions, which directly undermine the federal government’s sovereignty.”
Other prediction markets retreat
DraftKings pulled sports, political and novelty contracts in Utah on Thursday, the company told LSR in a statement. FanDuel followed Friday morning, while Fanatics will stop accepting trades in the state next week.
The fight over prediction market regulation is likely headed to the Supreme Court, as federal appeals courts have split in recent months. States won Sixth and Ninth Circuit rulings, while Kalshi holds a Third Circuit win in New Jersey.
Utah is backed by 37 states and Washington, D.C., which filed an amicus brief urging the 10th U.S. Circuit Court of Appeals to uphold the August ruling against Kalshi.
