Utah Gambling Crackdown: Felony Charges Filed Against Kalshi Founders

Thirteen felony counts were filed in Utah on Wednesday against prediction market operator Kalshi and its two co-founders, a move that intensifies the legal conflict between state regulators and the industry. The charges allege violations of the state’s prohibition on gambling, accompanied by a separate count for profiting from illegal activity. This action follows a federal judge’s earlier decision to allow Utah to enforce its anti-gambling statutes against the company.

The charging documents identify Kalshi, Chief Executive Officer Tarek Mansour, and Chief Operating Officer Luana Lopes Lara as the defendants. Utah Attorney General Derek Brown stated that the company has continued to operate in the state despite the federal court ruling. Brown noted that the federal registration status does not exempt the firm from state law. He described the activity as illegal gambling regardless of the terminology used to describe it.

Kalshi responded to the filing by labeling the charges a "crazy overreach." The company asserted that Utah is playing politics with the case. Kalshi indicated it intends to halt the proceedings in court, referencing a similar legal victory it achieved in Arizona. The legal battle has expanded across approximately 20 states, creating a fragmented regulatory environment that analysts expect will eventually reach the U.S. Supreme Court.

Under the current administration, the Commodity Futures Trading Commission has aligned with Kalshi’s position that prediction markets fall under federal jurisdiction. The agency has sued at least 10 states to prevent them from regulating these markets. Utah joined this federal lawsuit this week. The CFTC argues that state gambling laws are preempted by federal financial market regulations.

Arizona was the first state to file criminal charges against Kalshi earlier in the year. That case involved misdemeanor accusations of running an illegal gambling business. A judge subsequently placed that case on hold. However, a recent ruling by the 9th U.S. Circuit Court of Appeals in San Francisco denied Kalshi’s request to resume trading on sports and election events in Nevada. This decision may restore Arizona’s authority to pursue its own case.

Daniel Wallach, a gaming law attorney at the University of Miami School of Law, observed that Utah’s use of felony charges represents a departure from the civil actions typically brought against prediction market operators. He suggested that other states may adopt a similar strategy. Wallach noted that the Utah case could serve as a model for how states approach Kalshi and its competitor, Polymarket, following the appellate ruling in Nevada.

Kalshi initiated its legal challenge against Utah in February. The company sought to block the state from enforcing gambling restrictions while Utah prepared to enact legislation targeting prediction markets. A federal judge rejected this request, ruling that the Commodity Exchange Act does not prevent state enforcement. The 10th U.S. Circuit Court of Appeals in Denver declined to pause Utah’s regulatory efforts during the appeal last month.

Last week, Utah filed a separate lawsuit in state court against Kalshi and related entities. The suit seeks to stop the platform from trading on sports, elections, politics, culture, and other outcomes within the state. The attorney general’s office also requested that the court mandate the use of a specific geolocation provider to enforce these restrictions. Additionally, the state asked the court to order the defendants to surrender profits generated in Utah.

The felony charges carry the possibility of jail time for the individuals named, though the attorney general’s office has not yet specified the exact penalties it seeks. The case now moves forward in Utah’s courts, where the state will argue that the company’s operations constitute illegal gambling. The outcome will be watched closely by other state regulators and federal agencies involved in the jurisdictional dispute.