Kalshi founders face 14 criminal counts in Utah

• Utah files 14 criminal counts against Kalshi, CEO Tarek Mansour and COO Luana Lopes Lara.
• Charges stem from 12 sports wagers placed by an undercover state agent in September.
• Case lands as federal appeals courts split and the Supreme Court weighs prediction markets.

Utah Attorney General Derek Brown has filed 14 criminal counts against prediction market Kalshi and its two co-founders, accusing them of illegally promoting online gambling.

The charges, filed on Wednesday in Salt Lake City, make Utah the second state after Arizona to criminally prosecute the CFTC-registered exchange.

Twelve bets, fourteen counts

Utah’s decision to criminally charge Kalshi escalates a dispute that began in February. The case names KalshiEX LLC, chief executive Tarek Mansour and chief operating officer Luana Lopes Lara.

Together they face 13 felony counts and one misdemeanor, according to The Hill. The most serious is a second-degree felony count of pattern of unlawful activity.

Prosecutors added 12 counts of online gambling promotion, each a third-degree felony. They also filed a class A misdemeanor count of general gambling promotion.

The evidence comes from an undercover operation. Charging documents say state investigator Scott Eggerman opened a Kalshi account on September 13, using an undercover name, a local phone number and an undercover Visa debit card.

Over 11 days, he placed a dozen wagers on NFL and MLB games, a Real Salt Lake match and the University of Utah’s game against Utah State. Kalshi took a fee of 3 to 78 cents on each transaction, according to the filing.

In one example, a $5 spread contract on the Utah game paid out $4.13 after the Utes won by 36 points.

Derek Brown, Attorney General, State of Utah, said:

“Gambling is illegal in Utah, whether you place the bet, run the game, or promote it. Calling it a ‘prediction market’ doesn’t change what it is, and being federally registered doesn’t put a company above the law. A federal court has already ruled that Utah’s gambling laws apply to Kalshi. Kalshi kept taking bets from Utahns anyway. That is illegal, and we’re putting a stop to it.”

Kalshi cries politics

Kalshi dismissed the charges as politically motivated. A Kalshi spokesperson said in a statement to ABC4:

“This is a crazy overreach; Utah is clearly playing politics.”

Kalshi maintains that its event contracts are swaps traded on a federal exchange, placing them under the exclusive oversight of the Commodity Futures Trading Commission (CFTC).

Mansour restated that position in a recent op-ed, arguing that Kalshi is a market rather than a casino.

Arizona filed the first criminal case against Kalshi in March. A federal judge blocked that prosecution in April.

CFTC enters the fight

The charges landed two days after the United States and the CFTC sued Utah in federal court. That complaint, filed on October 26, asks a judge to stop the state from enforcing its gambling laws against contracts on CFTC-registered exchanges.

The agency argues that federal commodities law preempts state gambling statutes in this area. It is seeking preliminary and permanent injunctions.

Utah is the tenth state the CFTC has sued over prediction market enforcement. The others are Arizona, Connecticut, Illinois, Kentucky, Minnesota, New Mexico, New York, Rhode Island and Wisconsin.

Utah’s case leans on an August ruling from US District Judge Robert J. Shelby. He found that the state’s anti-gambling laws apply to Kalshi’s sports contracts, rejecting the preemption argument in a lawsuit Kalshi filed against Utah in February.

The Tenth Circuit has since declined Kalshi’s request for an emergency injunction. Utah followed with a civil lawsuit on October 20, which also targets two Susquehanna trading firms that act as market makers on Kalshi.

Appeals courts divided

Utah is one front in a national legal battle. Federal appeals courts disagree on whether federal commodities law shields sports event contracts from state gambling rules.

In April, the Third Circuit sided with Kalshi in New Jersey in a 2-1 decision. The Ninth Circuit ruled the other way in Nevada on August 28, finding that Kalshi’s sports contracts look like sports betting.

The Sixth Circuit followed on September 25, ruling against Kalshi in its cases with Ohio and Tennessee regulators. Court orders have already halted Kalshi’s sports offering in Nevada, Michigan and Washington state.

New Jersey has asked the Supreme Court to settle the question in Flaherty v. KalshiEX. Kalshi’s response to that petition is due on November 9.

Washington redraws lines

The CFTC is also reshaping the federal rulebook. A new rule that took effect on October 19 removes licensed sportsbook and casino wagers from the swap definition.

The agency has separately proposed treating sports event contracts as swaps. If adopted, that would strengthen the federal claim to oversee the products states are now prosecuting.

The stakes are rising with the midterm elections, where prediction market volumes have already passed $1.4 billion.

Beyond civil penalties

Naming the founders personally takes Utah’s enforcement beyond fines and geofencing orders. Prediction market executives now face the possibility of personal criminal liability in states that treat event contracts as gambling.

Kalshi is likely to lean on federal courts, as it did in Arizona. The backdrop in Utah is less favorable, with a federal judge and the Tenth Circuit both declining to shield the company.

Utah’s constitution has banned gambling since statehood in 1896. That makes the state one of the clearest tests of how far federal oversight of event contracts can reach, and the Supreme Court may yet have the final word.