Trump Administration Files Suit Against Utah to Protect Kalshi from Gambling Ban

A recent ruling from the U.S. legal landscape underscores the complexities surrounding state regulation of gambling. A ruling by Judge R. Shelby has reinforced that federal law does not preempt state authority when it comes to regulating gambling. According to Shelby, the Commodity Exchange Act (CEA) delineates that jurisdiction granted by the law explicitly allows for state regulation in nearly all but a few cases.

“Congress is aware that some states permit gambling while others do not, and the CEA explicitly provides for state jurisdiction,” Shelby emphasized.

Appeal to Higher Courts

The company Kalshi, which has been caught in the crossfire of these regulations, is currently appealing its recent loss to the U.S. Court of Appeals for the Tenth Circuit. Unfortunately, Kalshi was unable to secure an emergency injunction to halt the enforcement of a state gambling ban while litigation continues. On September 8, judges from the Tenth Circuit rejected Kalshi’s request for such an injunction. Just six weeks later, the state of Utah initiated a lawsuit against Kalshi, seeking to shut it down.

The new lawsuit from the Commodity Futures Trading Commission (CFTC) against Utah echoes arguments dismissed by an earlier district court ruling, even though some courts have taken differing stances.

The CFTC’s legal action points out that “Utah is not the first state that has attempted to infringe upon the Commission’s exclusive jurisdiction over swaps.” Previous cases have seen various federal courts issuing temporary restraining orders that have prevented states from enforcing their gambling laws against CFTC-regulated exchanges offering event-related contracts.

Notably, the Third Circuit Court of Appeals ruled that New Jersey could not impose regulations on sports betting related to prediction markets. However, Kalshi faced setbacks in the Sixth and Ninth Circuits, where courts upheld the enforcement of gambling laws in favor of states like Ohio, Tennessee, and Nevada.

The Supreme Court’s Role

As disparities among circuit court rulings persist, it appears increasingly likely that the Supreme Court will weigh in to clarify whether states can enforce their gambling laws on prediction markets. Notably, New Jersey has petitioned the Supreme Court for resolution, and 39 other states along with the District of Columbia have expressed their support for this petition through a formal brief.