Utah has filed 14 criminal charges against prediction market operator Kalshi and its co-founders, accusing them of promoting illegal online gambling after an undercover investigator placed 12 sports wagers on the platform.
Summary
- Utah filed 14 criminal charges against Kalshi and its co-founders over alleged illegal gambling.
- An undercover investigator placed 12 sports wagers totaling $114.87 and lost $25.10.
- The prosecution includes 13 felony counts and one misdemeanor involving alleged gambling promotion.
- Utah separately seeks up to $61.2 million in allegedly unlawful fees through its civil lawsuit.
- The CFTC has sued Utah, arguing that federal commodities law governs regulated prediction-market contracts.
In criminal charges filed Wednesday, Utah prosecutors named KalshiEX LLC, CEO Tarek Mansour and co-founder Luana Lopes Lara, accusing them of violating state gambling laws through 12 sports wagers placed by an undercover investigator. The charges include 13 felonies and one misdemeanor.
Meanwhile, the prosecution follows Utah’s civil lawsuit against Kalshi and a separate federal challenge brought by the Commodity Futures Trading Commission (CFTC). The disputes concern whether federally regulated prediction markets can offer sports-related event contracts in states that prohibit gambling.
Utah’s Kalshi charges follow 12 undercover sports bets
The criminal case centers on an investigation conducted by Scott Eggerman, an agent with the Utah Attorney General’s Office, during September.
Using a Utah residential address, local phone number and debit card, Eggerman opened an account on Kalshi on September 13. The platform required him to confirm his location through its geolocation service before allowing him to trade.
Investigators said he placed 12 wagers on sporting events over the following days, risking a total of $114.87 and recording a net loss of $25.10. The wagers involved NFL, college football, baseball, soccer and hockey matches.
One trade involved Utah’s football game against Utah State on September 19. Eggerman wagered $5 that Utah would win by more than 27.5 points, according to the charging documents. Utah won by 36 points, and the agent received a reported profit of $4.13.
Other transactions covered the Dallas Cowboys, Kansas City Chiefs, Atlanta Falcons and Real Salt Lake. Prosecutors alleged that Kalshi collected fees ranging from three cents to 78 cents on individual trades.
Each of the 12 transactions forms the basis of a third-degree felony charge for online gambling promotion. Prosecutors added a second-degree felony count alleging a pattern of unlawful activity and a class A misdemeanor covering general gambling promotion.
The state issued court summonses to Mansour and Lopes Lara instead of seeking arrest warrants. The defendants are expected to respond to the charges in Utah’s Third District Court in Salt Lake County.
Kalshi disputes Utah’s criminal gambling allegations
Utah Attorney General Derek Brown maintained that the platform continued accepting sports wagers after a federal court ruled that the state could enforce its gambling laws against Kalshi.
“Calling it a ‘prediction market’ doesn’t change what it is,” Brown said in a statement Wednesday, arguing that federal registration does not exempt companies from Utah’s gambling restrictions.
Kalshi rejected the prosecution, calling it a “crazy overreach” in a statement reported by the Deseret News. The company accused Utah of pursuing a political dispute and said it expected to defeat the charges in court.
Kalshi operates a CFTC-regulated designated contract market where customers trade event contracts tied to outcomes including sports, elections and economic data. The company argues that these products qualify as federally regulated derivatives.
Utah maintains that contracts tied to sporting results constitute gambling under state law. The criminal complaint targets the platform’s alleged conduct within Utah, while the company continues to contest the state’s authority over its exchange.
Utah seeks up to $61.2 million in separate civil lawsuit
The criminal prosecution arrives eight days after Utah filed a civil lawsuit against Kalshi and related trading firms on October 20.
As crypto.news previously reported, the state seeks between $30.6 million and $61.2 million in allegedly unlawful trading fees. Its estimates cover more than three billion wagers associated with Utah accounts through October 19.
The civil complaint requests restitution, surrender of allegedly unlawful profits and restrictions preventing state residents from accessing contracts involving sports, elections, politics and other events.
Kalshi had already challenged Utah’s enforcement powers in federal court. On August 4, District Judge Robert Shelby ruled that federal commodities law did not prevent Utah from enforcing its gambling statutes against the exchange.
The Tenth Circuit subsequently denied Kalshi emergency protection on September 8, allowing state enforcement to proceed while the company’s appeal remained pending.
CFTC challenges Utah over prediction market regulation
The CFTC entered the dispute on October 27, suing Utah over enforcement against federally registered prediction markets.
Federal lawyers asked the U.S. District Court for the District of Utah to prevent state authorities from applying gambling restrictions to covered transactions on CFTC-regulated exchanges.
The agency argues that federal commodities law gives it exclusive authority over the disputed contracts. Utah, however, maintains that its gambling laws remain enforceable despite the exchange’s federal registration.
Arizona previously filed criminal charges against Kalshi in March, becoming the first state to pursue that approach. A federal judge subsequently blocked the Arizona prosecution, and the state appealed the decision.
Utah’s criminal action follows that earlier case, while litigation over prediction-market jurisdiction continues in several federal appeals courts. New Jersey has petitioned the U.S. Supreme Court to examine the regulatory dispute, with Kalshi’s response due November 9.
Beyond Kalshi, state regulators have targeted Polymarket, with Nevada securing a preliminary injunction in June over alleged unlicensed wagering. New York followed with a lawsuit in September, accusing the prediction market platform of operating an illegal gambling service.
