Federal Agency Sues Utah Over Prediction Market Restrictions

A federal dispute over the regulation of online prediction markets escalated in Utah on October 27, 2026, when the Commodity Futures Trading Commission (CFTC) sued the state to challenge its efforts to restrict federally regulated event contracts. The lawsuit seeks to stop Utah from enforcing state gambling laws against covered markets, arguing that Congress assigned their oversight to federal authorities.

The federal complaint follows a civil lawsuit filed by Utah Attorney General Derek Brown the previous week. According to reports from KSL and The Salt Lake Tribune, the state is seeking to halt alleged unlawful gambling activities and obtain relief for harm it says residents have suffered.

The dispute centers on whether contracts tied to sports, elections, politics and other future events qualify as financial derivatives governed by the federal Commodity Exchange Act or gambling products subject to state restrictions.

The CFTC argues that its statutory authority prevents Utah from prohibiting transactions and exchanges operating within the federal regulatory framework. The commission is asking the court to block the state's enforcement efforts and affirm federal oversight of the affected markets.

In its complaint, the federal government argues that the contracts fall within the definition of swaps and that the exchanges involved have received federal regulatory approval. It also contends that requiring these markets to exclude Utah residents would conflict with federal requirements for impartial access by eligible participants.

The commission maintains that Congress established a comprehensive regulatory system for commodity derivatives to address conflicts between national markets and state laws. Its lawsuit seeks a declaration that Utah's gambling restrictions cannot be applied to the federally regulated event contracts at issue.

CFTC Chairman Michael Selig defended the agency's intervention, arguing that event contracts can serve purposes beyond hedging and investment. He also said the markets can provide information about the likely outcomes of future events.

Selig said Congress had assigned the commission sole responsibility for overseeing these markets and that the agency would defend its jurisdiction over commodity derivatives. The CFTC has previously brought similar legal actions against Arizona, Connecticut, Illinois, Kentucky, Minnesota, New Mexico, New York, Rhode Island and Wisconsin, according to the complaints described in the reports.

Utah has advanced a different legal position. Brown's civil complaint argues that contracts offered to residents are indistinguishable from conventional gambling and violate state prohibitions. The attorney general's office declined to comment on the new federal lawsuit, citing the ongoing litigation, according to The Salt Lake Tribune and Ars Technica.

The state also filed criminal charges on October 28, according to KSL. The charging document accuses the company operating the platform, its co-founder and chief executive Tarek Mansour, and co-founder and chief operating officer Luana Lopes Lara of unlawful conduct related to online gambling.

The charges include one second-degree felony count alleging a pattern of unlawful activity, 12 third-degree felony counts involving online gambling promotion and a Class A misdemeanor count of general gambling promotion. These are allegations, not findings of guilt.

According to the charging document described by KSL, an investigator began an undercover investigation on September 13 and allegedly placed transactions connected to 12 sporting events while confirming his location in Utah. Prosecutors contend that the activity continued despite the state's restrictions.

The federal case also revives a jurisdictional dispute that has produced conflicting court decisions. In August, U.S. District Judge Robert Shelby ruled in favor of Utah in an earlier case, concluding that federal law did not prevent the state from enforcing its anti-gambling statutes.

On September 8, the U.S. Court of Appeals for the Tenth Circuit rejected an emergency request to suspend enforcement while an appeal proceeded.

Other federal courts have reached different conclusions. The Third Circuit ruled against New Jersey's attempt to regulate certain sports-related event contracts, while decisions involving Ohio, Tennessee and Nevada favored state authority. The competing rulings have increased the likelihood that the U.S. Supreme Court will ultimately resolve the dispute.

New Jersey has petitioned the Supreme Court to address the disagreement among appellate courts, with 39 other states and the District of Columbia supporting its petition, according to Ars Technica. The federal government's lawsuit against Utah now places the competing claims of state gambling authority and federal derivatives regulation before the same district court that previously ruled against the prediction market operator.