Utah files criminal charges against Kalshi and its co-founders
Utah has escalated its battle to stop prediction markets operating in the state, filing criminal charges against Kalshi and its co-founders over what it alleges is illegal gambling.
Utah Attorney General Derek Brown filed the charges on Wednesday in Utah’s Third Judicial District Court in Salt Lake County against KalshiEX, CEO Tarek Mansour and Chief Operating Officer Luana Lopes Lara, The Block reported.
According to the charging documents, as reported by the Deseret News, the 14 counts include one second-degree felony count of pattern of unlawful activity, 12 third-degree felony counts of online gambling promotion and one class A misdemeanor count of general gambling promotion.
The charges stem from 12 sports wagers placed by an undercover agent for the Utah Attorney General’s Office from within the state, according to the filing.
“Calling it a ‘prediction market’ doesn’t change what it is,” Brown said in a statement, adding that federal registration does not place a company above the law.
A Kalshi spokesperson told The Block that the charges were an overreach and accused Utah of playing politics, adding that the company expects to defeat them in court as it did in Arizona.
The criminal case follows a civil lawsuit Utah filed on 20 October against five Kalshi entities and two Susquehanna trading firms. The suit seeks to block Kalshi’s sports, elections, politics and culture contracts in Utah, enforced through a geolocation provider, along with restitution.
The complaint estimates that Kalshi generated between US$30.6 million and US$61.2 million in fees from Utah-based accounts, and that Utah residents lost around US$5.5 million on wagers.
On Tuesday, the Commodity Futures Trading Commission (CFTC) announced it had sued Utah in federal court to block the state’s efforts to shut down CFTC-registered contract markets using state laws. According to the CFTC, it has also initiated legal proceedings against nine other states.
Kalshi and the CFTC argue that event contracts traded on federally registered exchanges fall under the CFTC’s exclusive jurisdiction.
Charlotte Capewell brings her passion for storytelling and expertise in writing, researching, and the gambling industry to every article she writes. Her specialties include the US gambling industry, regulator legislation, igaming, and more.
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Utah turns a civil fight into a criminal test case
Utah’s criminal charges against Kalshi and its co-founders mark the sharpest escalation yet in a dispute that has moved from regulatory warnings to federal preemption claims, state civil litigation and now potential felony exposure for executives. The case turns on a question with national implications: whether sports-linked event contracts offered by a federally regulated prediction market are financial products under federal commodities law or illegal gambling when accessed in a state that bans wagering.
Attorney General Derek Brown’s office has taken the position that Kalshi’s registration with the Commodity Futures Trading Commission does not shield the company from Utah’s gambling laws. That position has hardened over months as Utah officials sought to block the platform, recover proceeds tied to Utah accounts and preserve the state’s constitutional prohibition on gambling. Kalshi has argued the opposite: that its contracts trade on a CFTC-regulated exchange and cannot be subjected to a patchwork of state gambling rules.
The criminal complaint follows Utah’s earlier civil lawsuit and comes as the CFTC has entered the fray on Kalshi’s side in a broader jurisdictional fight. That makes Utah a focal point in a national battle over prediction markets, sports contracts and the boundary between investing, hedging and betting.
A preemptive lawsuit set the collision in motion
Kalshi moved first in Utah, filing a federal lawsuit against Gov. Spencer Cox, Brown and other state officials after concluding the state was preparing to enforce its anti-gambling laws against the company. In that case, Kalshi sought to block Utah officials from treating its markets as illegal gambling, citing its status as a CFTC-regulated designated contract market under the Commodity Exchange Act.
The suit reflected Kalshi’s wider legal strategy. The company had already challenged enforcement efforts in several states with legal sports betting, including Nevada, New Jersey, Maryland, Tennessee, New York, Ohio and Connecticut. Utah was different because it has no legal sports gambling market and a constitutional ban on gambling. That made the state’s posture less about protecting a licensed betting regime and more about defending a categorical prohibition.
Kalshi’s complaint pointed to public statements from Utah leaders, including Cox’s assertion that companies like Kalshi were illegal in Utah. The company argued those comments signaled imminent enforcement and mischaracterized its event contracts as wagers. Utah officials countered that the substance of the transactions, not the label placed on them, should control. If customers were staking money on sports outcomes, the state argued, the activity fit within Utah’s gambling ban.
Utah gained leverage in federal court
The first major judicial ruling strengthened Utah’s hand. In August, U.S. District Judge Robert Shelby rejected Kalshi’s argument that federal law preempted state gambling enforcement, allowing Utah to proceed under its own laws. As Complete iGaming reported, the federal court allowed Utah to enforce its gambling laws against Kalshi, finding that Congress had not required states to provide access to every event contract, including those that state law treats as gambling.
That ruling did not finally resolve the national preemption question, but it changed the immediate balance of risk. Kalshi appealed, and the dispute moved to the 10th U.S. Circuit Court of Appeals. The company also sought an injunction to prevent Utah from taking enforcement action while the appeal continued. A two-judge panel rejected that request, leaving Utah free to proceed as the broader appeal remained pending.
The injunction fight underscored the stakes for both sides. Kalshi warned that allowing individual states to apply gambling laws to federally regulated exchanges would fragment national markets. Utah argued that the CFTC’s oversight of derivatives markets did not erase the state’s long-standing power to ban gambling within its borders. The court did not decide the ultimate preemption issue, but by refusing to pause enforcement, it gave Utah room to intensify its campaign.
The state’s civil case broadened the attack
Utah then filed a state-court civil lawsuit accusing Kalshi of operating an illegal gambling business and seeking to recover millions of dollars tied to residents’ activity on the platform. The complaint asked a judge to block Kalshi’s sports, election, politics and culture contracts in Utah and approve geolocation measures to keep state residents off the platform.
In that suit, Utah estimated that Kalshi generated between $30.6 million and $61.2 million in fees from Utah accounts and that residents lost about $5.5 million on individual wagers. The state’s civil lawsuit against Kalshi also named subsidiaries and two Pennsylvania-based trading companies that allegedly provided pricing and liquidity.
The civil claims sharpened Utah’s argument that Kalshi was not merely hosting trades between independent market participants. The state said the company created markets, facilitated wagers, processed payouts and profited from customer activity. That framing matters because Kalshi’s federal-law defense depends in part on treating its contracts as exchange-traded financial instruments rather than sportsbook-style products.
Utah’s legislature had also acted to clarify the state’s position. HB243, passed earlier in the year, specified that betting on individual actions, statistics, occurrences or non-occurrences constitutes gambling under state law. That language was aimed at the same gray area where sports prop bets, in-play markets and prediction contracts overlap.
The CFTC moved to defend federal authority
The legal pressure on Kalshi drew an unusual response from its primary federal regulator. The CFTC sued Utah and Brown, asking a federal court to block the state from investigating or enforcing state law against trading on CFTC-regulated exchanges. The agency argued that federal commodities law gives it exclusive authority over prediction markets offered by registered contract markets.
The CFTC lawsuit against Utah over the Kalshi dispute placed the federal government directly opposite a state that says it is enforcing a core police power. CFTC Chairman Mike Selig has argued that event contracts can help users hedge risk and generate information about future events. Utah says that rationale does not apply when the practical effect is to let residents bet on sports and other outcomes barred by state law.
The CFTC’s action in Utah is part of a broader campaign. The agency said it has sued nine other states over similar efforts to restrict prediction markets. Courts have not spoken with one voice. Federal appeals courts have split in related Kalshi cases, with the Ninth and Sixth circuits siding with state regulators and the Third Circuit siding with Kalshi. That conflict increases the odds that the issue eventually lands before the U.S. Supreme Court.
The CFTC’s position also is not uncontested among Democrats and former regulators. Former CFTC Chairman Gary Gensler has argued in a Supreme Court brief that the Dodd-Frank Act did not give the agency authority to regulate sports betting. Former Sen. Chris Dodd, a co-author of the law, has backed the states’ position. Those divisions weaken any claim that Congress clearly intended to federalize sports-linked prediction markets.
Why the outcome could reshape prediction markets
Utah’s criminal case raises the stakes beyond corporate compliance. By charging Kalshi’s chief executive and chief operating officer, the state is testing whether executives at federally regulated exchanges can face personal criminal liability when state officials classify listed contracts as gambling. That risk could alter how prediction market operators design products, screen users and respond to states with restrictive gambling laws.
For Kalshi, a win could help establish a national operating model in which CFTC registration preempts state-by-state gambling restrictions. For Utah and other states, a win would preserve their ability to block sports event contracts and similar products regardless of federal exchange oversight. The result will help define whether prediction markets remain a niche financial venue, become a national alternative to sportsbooks or face state-by-state limits that constrain growth.
The immediate cases may proceed on separate tracks: criminal charges in state court, Utah’s civil enforcement action, Kalshi’s appeal in the 10th Circuit and the CFTC’s federal suit against Utah. Together, they present the same central conflict. Prediction markets have expanded into territory that looks to regulators like betting but is structured by operators as trading. Utah is now forcing courts to decide which label carries the law.
