Utah Files Felony Charges Against Kalshi and Its Co-Founders

Utah has filed criminal charges against prediction market Kalshi and its two co-founders, accusing them of illegally promoting gambling in the state. The move comes a day after the Commodity Futures Trading Commission (CFTC) sued Utah to stop it from enforcing its gambling laws against federally regulated exchanges.

According to the charging documents, KalshiEX LLC, CEO Tarek Mansour and COO Luana Lopes Lara face one count of pattern of unlawful activity, a second-degree felony, 12 counts of online gambling promotion, a third-degree felony, and one count of gambling promotion, a misdemeanor.

Undercover bets

Prosecutors say a special agent with the Utah State Bureau of Investigation opened an undercover account as a Utah resident and placed 12 wagers in September on sports including NFL and college games. The agent passed a location check confirming he was in the state, and Kalshi earned money from fees on each bet, the charges allege.

"Gambling is illegal in Utah, whether you place the bet, run the game, or promote it," Attorney General Derek Brown said. "Being federally registered doesn't put a company above the law." His office did not say what penalties it will seek, though the felony counts carry possible jail time.

Kalshi called the case "a crazy overreach" and said Utah is "clearly playing politics," adding that it expects to stop the case in court, as it did in Arizona.

A fight across courts

Utah, whose constitution bans gambling, sued Kalshi in state court last week. The CFTC then filed its own suit, making Utah the 10th state the agency has taken to court. Chairman Michael Selig said Congress made the CFTC the sole federal regulator of these markets.

Utah has won one round so far. In August, U.S. District Judge Robert Shelby ruled that federal law does not preempt Utah's ability to enforce its anti-gambling laws. Kalshi is appealing to the Tenth Circuit, which denied its injunction request in September.

Federal appeals courts are split. The Third Circuit ruled in April that New Jersey cannot regulate sports contracts on these platforms, while the Sixth and Ninth Circuits sided with Ohio, Tennessee and Nevada. New Jersey has asked the Supreme Court to resolve the question, backed by 39 other states and the District of Columbia. Gambling policy fellow Isaac Rose-Berman expects the dispute to keep escalating until it reaches the justices.