CFTC, DOJ Seek to Block Utah's Criminal Charges Against Kalshi

After Utah filed criminal and civil charges against Kalshi, the Commodity Futures Trading Commission and the Justice Department have asked a federal judge to block them. 

Now, there's a motion for a temporary restraining order and a preliminary injunction to block Utah from enforcing its gambling laws. 

This ask from the CFTC and Justice Department came just one day after Utah Attorney General Derek Brown filed 14 charges against not only Kalshi but the co-founders, Tarkek Mansour and Luana Lopes Lara, for promoting illegal gambling. 

“Pursuing draconian criminal and civil penalties on an unsettled legal theory that is currently winding through the courts crosses the line,” the CFTC and Justice Department said. “The State’s civil and criminal enforcement actions must be enjoined immediately.”

As a result of these charges, DraftKings Predictions, FanDuel Predicts, and Fanatics Markets agree to stop all trades on November 4. 

CFTC, Justice Department Challenge Utah's Gambling Enforcement

The CFTC and Justice Department referred to the charges against Kalshi and the co-founders as "unprecedented," but did acknowledge a federal judge ruling against Kalshi in their attempt for a preliminary injunction in August. 

“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 say that event contracts are swaps under the Commodity Exchange Act. 

The motion also says that the federal government is now “irreparably harmed by Utah’s actions, which directly undermine the federal government’s sovereignty.”

Utah Dispute Adds to Nationwide Prediction Market Legal Battles

According to LSR, DraftKings pulled sports, political, and novelty contracts last week. 

The fight involving prediction markets will only continue. The best path to resolution is for the Supreme Court to take New Jersey's case after the Third Circuit ruled in favor of Kalshi. Meanwhile, the Ninth and Sixth Circuits ruled against them.