Utah files felony charges against Kalshi and its co-founders over sports bets
In brief
- Utah charged KalshiEX LLC, CEO Tarek Mansour and COO Luana Lopes Lara with gambling promotion, ABC4 reported.
- Charges include a second-degree felony and 12 third-degree felony counts of online gambling promotion.
- Prosecutors allege an undercover state agent placed 12 sports wagers on Kalshi in September.
- Kalshi called the charges "a crazy overreach" and said Utah is playing politics.
- CFTC sued Utah on Tuesday, the 10th state the agency has taken to court.
What prosecutors allege
According to the charging documents, KalshiEX LLC, Mansour and Lopes Lara face one count of pattern of unlawful activity (a second-degree felony), 12 counts of online gambling promotion (a third-degree felony) and one count of gambling promotion, which is a misdemeanor.
The case rests on an undercover account. A Utah State Bureau of Investigation special agent posed as a Utah resident and placed 12 wagers on sports, including NFL and college games, in September, passing a location check that confirmed he was in the state. Prosecutors allege Kalshi earned proceeds from the fees it charged on each bet.
The Attorney General's office didn't say what penalties it'll seek, though the felony charges carry the possibility of jail time, according to the Associated Press.
"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," Utah Attorney General Derek Brown said in a statement.
Kalshi called the charges "a crazy overreach" in its own statement, said Utah was playing politics and said it looks forward to stopping the case in court, as it did in Arizona.
Washington weighs in
Utah, whose state constitution bans gambling, sued Kalshi in state court the week before. Then on Tuesday the CFTC sued Utah to block its enforcement actions, making it the 10th state the agency has taken to court. CFTC Chairman Michael Selig said Congress entrusted the agency to be the federal regulator with sole responsibility to oversee these markets. President Donald Trump backed the CFTC in May (he also called several state officials who'd challenged the platforms "scum").
Kalshi hasn't had much luck in Utah's federal courts so far. In August, U.S. District Judge Robert Shelby rejected its bid to block enforcement, ruling that federal law doesn't preempt the state's ability to enforce its anti-gambling laws. Kalshi's appealing to the Tenth Circuit, which denied its request for an injunction in September.
A circuit split heading to the Supreme Court
Federal appeals courts don't agree on whether states can apply gambling laws to prediction markets. The Third Circuit ruled in April that New Jersey can't regulate sports contracts on the platforms, while the Sixth and Ninth Circuits sided with Ohio, Tennessee and Nevada in August and September.
New Jersey has asked the Supreme Court to settle it.
That request is backed by 39 other states and the District of Columbia. Isaac Rose-Berman, a gambling policy fellow at the American Institute for Boys and Men, told ABC4 that different judges are saying different things, and that the fight will keep escalating until it eventually reaches the Supreme Court.
Frequently asked questions
What charges does Kalshi face in Utah?
According to the charging documents, KalshiEX LLC, CEO Tarek Mansour and COO Luana Lopes Lara face one count of pattern of unlawful activity (a second-degree felony), 12 counts of online gambling promotion (a third-degree felony) and one misdemeanor count of gambling promotion. The felony charges carry the possibility of jail time, according to the Associated Press.
Why is the CFTC suing Utah?
The CFTC sued Utah on Tuesday to block its enforcement actions against CFTC-registered exchanges, making Utah the 10th state the agency has taken to court. Chairman Michael Selig said Congress entrusted the CFTC to be the federal regulator with sole responsibility to oversee these markets.
Can states apply gambling laws to prediction markets?
Federal appeals courts have split. The Third Circuit ruled in April that New Jersey can't regulate sports contracts on the platforms, while the Sixth and Ninth Circuits sided with Ohio, Tennessee and Nevada. New Jersey has asked the Supreme Court to settle the question, backed by 39 other states and the District of Columbia.
