Utah Judge Rejects Kalshi’s Federal Shield From Gambling Laws

Shelby Finds Multiple Readings of the CEA, Disfavors Preemption

U.S. District Judge Robert J. Shelby ruled Tuesday that the Commodity Exchange Act does not shield Kalshi from Utah’s anti-gambling laws, granting the state summary judgment and denying the exchange’s motion for a preliminary injunction. “The court concludes the federal law relied upon by Kalshi does not preempt Utah’s ability to enforce its anti-gambling laws,” Shelby wrote.

The reasoning turned on ambiguity rather than a finding that event contracts are gambling. Shelby held that the CEA’s jurisdictional provisions admit multiple plausible readings, and that courts normally disfavor preemption in exactly that situation. “Given the [Commodity Exchange Act’s] framework and the history of State regulation of gambling, the court cannot conclude the CEA is so pervasive that there is no room for the State of Utah to supplement it,” he wrote, in a decision first detailed by Bloomberg Law.

He also rejected Kalshi’s central statutory argument. The exchange had contended that language changes introduced by the Dodd-Frank Act established federal preemption over derivatives trading; Shelby called that an “implausible” reading of congressional intent, noting that Kalshi itself concedes gambling is a field “traditionally regulated by the states.”

Utah is an unusually hostile venue for the argument. The state constitution bans gambling outright, and offering online betting there is a third-degree felony. A new state law adding proposition bets to the statutory definition of gambling prompted Kalshi to sue in February, after Gov. Spencer Cox publicly attacked prediction markets and the company grew concerned that Utah intended to bring a criminal enforcement action.

“You can’t rebrand illegal gambling as a federal commodity, and today a federal judge agreed with us,” Utah Attorney General Derek Brown said, adding, “Kalshi bet that clever branding would beat Utah law. Kalshi lost and Utah won.” Cox was blunter still, posting after the ruling that “prediction markets are gambling, full stop” and that they are “causing tremendous harm to countless American families.”

Kalshi spokesperson Jacki McGavick said the company disagrees with the decision and that it will not be the final word in Utah. Sports event contracts remain available to Utah users for now, with no enforcement action filed.

New York’s attorney general submitted Shelby’s decision as supplemental authority within a day, using it to oppose the CFTC’s motion for a preliminary injunction against the state after it sued Kalshi as an unlicensed gambling operation last week.

Gambling attorney Daniel Wallach, who flagged the New York citation, said the expected Tenth Circuit appeal would put prediction-market cases before seven of the 13 federal appellate circuits – the First, Second, Third, Fourth, Sixth, Ninth and Tenth – with the Seventh and Eighth expected to follow. That scale of circuit activity is what typically produces a split ripe for Supreme Court review.

A Washington state court granted an injunction on July 20 after rejecting the same preemption defense and finding that Kalshi “operates an online betting platform,” and more than 40 states have pushed back on the CFTC’s claim to exclusive jurisdiction. Kalshi’s clearest wins remain the Third Circuit’s April ruling shielding it in New Jersey and a Minnesota federal judge’s order blocking that state’s felony ban last week.