Utah may enforce its anti-gambling laws, even if they include bans of proposition betting, a federal judge ruled on Tuesday in response to a lawsuit from Kalshi challenging a new state law.
The prediction market platform had described the law, which classified proposition bets within the definition of banned gambling, as “an intrusion into the federal government’s exclusive authority to regulate derivatives trading on exchanges overseen by the Commodity Futures Trading Commission.”
But, U.S. District Judge Robert Shelby disagreed, saying that the federal commodities law does not override Utah’s anti-gambling mandates.
“State regulation of its gambling laws does not prevent the CFTC from serving the public interest in regulating derivates markets, preventing price manipulation, ensuring financial integrity, protecting market participants, and promoting innovations,” the judge wrote in the order. “Kalshi has not met its burden of showing otherwise.”
Utah Gov. Spencer Cox, who had vowed on social media to use every resource within his disposal as governor to beat prediction markets in court, applauded the news on Tuesday.
“Prediction markets are gambling, full stop,” Cox said in a post. “They are causing tremendous harm to countless American families. Today’s ruling affirms that Utah’s anti-gambling laws are an appropriate way to protect our citizens and are not preempted by federal law.”
Jacki McGavick, a Kalshi spokesperson, said the company disagrees with the judge’s decision and will appeal.
“Multiple courts have already recognized that prediction markets fall under exclusive federal jurisdiction, and we will continue to defend that position,” McGavick said in an email.
The issue of whether prediction markets, which allows people to bet money on the outcome of almost anything, fits the definition of gambling, has caused a stir all over the country. The debate is especially tense in Utah, where gambling has historically been strictly prohibited.
Kalshi had argued in a lawsuit filed in February that because the company is a federally designated derivatives exchange, it should be under the exclusive oversight of the Commodity Futures Trading Commission.
“Kalshi offers consumers the chance to trade many types of event contracts, all of which are subject to extensive oversight by the CFTC, and are lawful under federal law,” the company said in its complaint. “The CFTC has the authority to initiate the review of, and under certain circumstances, prohibit the trading of, contracts listed on Kalshi’s federally regulated exchange. But the CFTC has since made clear that it views Kalshi’s offerings as legal and within its purview.”
Utah Attorney General Derek Brown, however, contends Kalshi “can’t rebrand illegal gambling as a federal commodity,” he said in a statement.
“Utah’s constitution bans gambling to protect Utah families, and my office will enforce that ban,” Brown said. “Gambling is gambling no matter what any company calls it.”
This report was originally published at UtahNewsDispatch.com.
