Utah Files 14 Criminal Charges Against Kalshi and Its Two Co-Founders, a Day After CFTC Sued the State

Since a federal judge ruled in August that Utah can enforce its gambling laws against Kalshi, the fight over who regulates prediction markets has moved from civil litigation into criminal court.

On Wednesday, Oct. 28, Utah Attorney General Derek Brown, a Republican, filed charges in state court against KalshiEX, LLC, Mansour and Lopes Lara. Each defendant faces 14 counts: one pattern of unlawful activity (a second-degree felony), 12 counts of online gambling promotion (third-degree felonies), and one count of general gambling promotion (a class A misdemeanor). These are allegations. No one has been convicted.

What Utah says happened

The charges are tied to sports bets offered on Kalshi between Sept. 13 and Sept. 24. According to the complaint, Special Agent Scott Eggerman of the Attorney General's Office opened an undercover account using an undercover name and a Visa debit card. His profile listed a Utah address, a local phone number and a Utah bank.

Over two weeks he placed a dozen wagers totaling $114.87. They covered the NFL, MLB, a local college football game and a Major League Soccer match involving Real Salt Lake. He lost $20 betting that Troy would upset Utah State.

Utah's position is that he should never have been able to open the account. In August, U.S. District Judge Robert J. Shelby found that federal law did not preempt Utah from enforcing its anti-gambling laws against Kalshi. In September, the 10th U.S. Circuit Court of Appeals denied Kalshi's request for an injunction while its appeal proceeds, so Shelby's order stands.

"A federal court has already ruled that Utah's gambling laws apply to Kalshi," Brown said. "Kalshi kept taking bets from Utahns anyway." He added: "Calling it a 'prediction market' doesn't change what it is, and being federally registered doesn't put a company above the law."

The state did not issue arrest warrants for Mansour or Lopes Lara. They were issued summonses to answer the charges in Third District Court in Salt Lake County, the Salt Lake Tribune reported. The attorney general's office has not said what penalties it will seek, though the felony counts carry possible jail time.

Kalshi's response and the federal fight

Kalshi said in a statement: "This is a crazy overreach; Utah is clearly playing politics. We look forward to putting a stop to this in court, just like we did in Arizona." The company's long-held position is that prediction markets fall exclusively under federal jurisdiction and are not governed by state gambling law.

The Commodity Futures Trading Commission backs that view. On Tuesday, Oct. 27, it sued Utah to block enforcement of the state's gambling laws against CFTC-registered markets. The agency said Utah's effort "obstructs Congress's decision to federally preempt state law." Utah is the 10th state the Trump administration has sued over prediction-market regulation.

Utah also filed a civil suit last week. It seeks an order barring Kalshi from offering bets on sports, elections, politics and other events, and it accuses the company of a "brazen pattern of unlawful conduct." Brown said Utah is one of only two states whose constitution prohibits gambling, and that gambling has been banned for 130 years.

Why Utah is a harder case than most

Isaac Rose-Berman, a gambling policy fellow at the American Institute for Boys and Men, told Salt Lake City's ABC affiliate that suits in other states, such as New York, center on alleged failures to follow online gambling rules or meet tax obligations. Utah bans all gambling outright, so there is no licensing path to argue over.

Arizona filed criminal charges against Kalshi in March. Kalshi says it beat them, and a federal judge blocked that case. Utah and Arizona are the only two states to bring criminal charges against the company, according to Reason.

The National Conference of State Legislatures counts more than 20 lawsuits and cease-and-desist actions against Kalshi nationwide. Courts have split. Two federal appeals courts have ruled against Kalshi and Polymarket's bids to fend off state oversight. The 3rd Circuit ruled in April that the CFTC has exclusive authority over prediction markets in New Jersey, which has since asked the Supreme Court to take up the question.

The outcome reaches beyond Kalshi. Ars Technica noted that if Utah can shut Kalshi down, that could threaten rival Polymarket and sportsbooks such as DraftKings and FanDuel, which advertise prediction-market products in states like Utah and are registered with the CFTC.

Mansour recently told Reason's Nick Gillespie that a "big group" of lawmakers in both parties actually favor prediction markets. Utah's attorney general has shown he is not among them.

What comes next

The Third District Court has not been reported to have set a date for the defendants' first appearance. The CFTC's suit against Utah and Kalshi's 10th Circuit appeal are both pending. The New Jersey petition could put the preemption question before the Supreme Court. Until a court settles it, a company the federal government calls a lawfully registered exchange is being prosecuted as a criminal gambling operation by a state that says federal registration is no defense.