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A Utah federal judge handed Kalshi a sharp loss Tuesday. U.S. District Judge Robert J. Shelby ruled that the Commodity Exchange Act doesn’t wipe out Utah’s anti-gambling statutes when it comes to the company’s sports event contracts — and Kalshi’s argument that federal law should just override everything? Shelby called it “implausible.”
The ruling is a pretty significant blow, not just because of Utah specifically, but because of what it sets in motion. Kalshi plans to appeal to the Tenth Circuit, which would drag prediction-market litigation into seven of the country’s thirteen federal appellate circuits. Seven. That’s a lot of courtrooms, a lot of judges, and a lot of potential for conflicting outcomes. And conflicting outcomes at the circuit level tend to get one place’s attention fast — the Supreme Court.
What Shelby Actually Said
Shelby’s decision granted Utah summary judgment. He said the CEA framework allows for multiple interpretations and doesn’t fully knock out state gambling laws. Kalshi had leaned hard on the Dodd-Frank Act, arguing that amendments to derivatives trading rules implied federal preemption. Shelby wasn’t buying it. He said that reading was “implausible” — not a word judges throw around lightly — and found that Utah keeps its full authority to enforce its own anti-gambling statutes against the platform.
Utah’s position here isn’t soft. The state’s constitution enshrines a strict anti-gambling stance, and the legislature recently expanded the definition of gambling to specifically cover proposition bets. That expansion is basically what triggered Kalshi’s lawsuit back in February. So Kalshi walked into a state that had just sharpened its legal knife, filed suit, and lost.
Utah Attorney General Derek Brown said Kalshi’s strategy of rebranding betting as a federal commodity failed. Governor Spencer Cox was more blunt — prediction markets are gambling, he said, and they cause real harm. Neither seemed particularly open to a middle ground.
Kalshi spokesperson Jacki McGavick pushed back, said the company disagrees with the ruling, and confirmed Kalshi will keep operating in Utah while legal proceedings continue. No details on exactly how that works given the ruling, but the company’s clearly not pulling out yet.
New York Moves Fast, Other States Watch
New York’s attorney general didn’t wait long. Within what seemed like hours of Shelby’s decision landing, New York used the ruling as supplemental authority in its own case against Kalshi, which it considers an unlicensed gambling entity. That’s a fast pivot — and it tells you something about how state AGs are coordinating here, or at least watching each other’s moves closely.
It’s not just New York and Utah. Over 40 states have opposed the Commodity Futures Trading Commission’s claim to exclusive jurisdiction over prediction markets. That’s a massive coalition, and it makes Kalshi’s federal preemption argument look increasingly lonely.
Washington state granted an injunction against Kalshi too, blocking its preemption defense there. So the losses are stacking up. But it’s not a clean sweep against the company — Kalshi has won in a few places. The Third Circuit ruled in its favor on New Jersey in April, and a federal judge in Minnesota blocked enforcement of a state felony ban against the company. Mixed results across the board, basically.
What a Supreme Court Fight Could Mean
The Tenth Circuit appeal probably matters more than any single state ruling at this point. If the Tenth Circuit sides with Utah and other circuits have gone differently — New Jersey via the Third Circuit being the obvious example — there’s a real circuit split. Circuit splits are exactly the kind of thing that lands on the Supreme Court’s docket.
A Supreme Court ruling on prediction market jurisdiction would reshape the entire sector. Right now the regulatory picture is fragmented and kind of chaotic — some states blocking Kalshi, others letting it operate, the CFTC claiming federal authority while 40-plus states say otherwise. That can’t hold indefinitely.
Prediction markets have grown fast in recent years, pulling in traders who see them as financial instruments rather than gambling. The legal question of whether they’re commodities or bets isn’t just semantic — it determines who regulates them, what consumer protections apply, and whether platforms like Kalshi can operate nationally without navigating 50 different state regimes.
Unclear yet whether other prediction market operators are watching Kalshi’s legal strategy and planning to follow it, or quietly relieved someone else is absorbing the litigation costs first. Probably both.
Kalshi keeps operating in states where it’s won. Jacki McGavick said as much — the company isn’t done fighting.
Frequently Asked Questions
What did the Utah judge rule about Kalshi’s federal preemption argument?
Judge Robert J. Shelby ruled that the Commodity Exchange Act does not preempt Utah’s anti-gambling laws and called Kalshi’s Dodd-Frank preemption argument “implausible,” granting Utah summary judgment.
Which states have ruled against Kalshi and which have ruled in its favor?
Utah and Washington have ruled against Kalshi, while New Jersey — via a Third Circuit decision in April — and Minnesota, where a federal judge blocked a state felony ban, have gone in Kalshi’s favor.
