National Sports

Utah charges Kalshi and its founders, escalating a fight over who can regulate prediction markets

AP Photo/Jeff Chiu

HARRISBURG, Pa. (AP) -- Utah on Wednesday filed criminal charges against prediction market operator Kalshi and two of its executives, months after a federal judge rejected Kalshi's effort to prevent Utah from enforcing its strict anti-gambling laws against the activity.

The felony charges could represent a new tactic in how states try to assert regulatory authority over the fast-expanding activity, a clash that appears headed to a showdown at the U.S. Supreme Court.

The charges include 13 counts of violating the state's prohibition on gambling and another charge involving profiting off illegal activity.

The state's charging documents name Kalshi and its co-founders, chief executive officer Tarek Mansour and chief operating officer Luana Lopes Lara.

In a statement, Utah Attorney General Derek Brown said Kalshi has continued to operate in Utah, despite a federal court ruling that Utah's gambling laws apply to the company.

"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," Brown said in a statement.

The attorney general's office did not immediately say what sort of criminal penalties it would seek in the case, although the felony charges carry the possibility of jail time.

In a statement, Kalshi called the charges a "crazy overreach" and said that "Utah is clearly playing politics."

"We look forward to putting a stop to this in court, just like we did in Arizona," it said.

Utah has been on the front lines of a battle between states and the federal government over who regulates the markets. Litigation has spread across roughly 20 states, creating a fragmented legal landscape that analysts say will likely be settled by the U.S. Supreme Court.

Kalshi has maintained that prediction markets fall exclusively under federal jurisdiction and are not governed by state gambling laws.

Under President Donald Trump, the federal agency responsible for regulating financial markets, the Commodity Futures Trading Commission, has agreed and even sued at least 10 states -- including Utah this week -- to try to stop states from regulating prediction markets.

Arizona earlier this year became the first state to file criminal charges against Kalshi, accusing it of operating an illegal gambling business within its borders.

A judge later put that case on hold.

But one legal analyst, Daniel Wallach, said Arizona's authority to pursue the misdemeanor charges could soon be restored after the 9th U.S. Circuit Court of Appeals in San Francisco refused to let Kalshi restart trading on sports and elections events in Nevada while it fights the state's effort to shut it down.

Still, Utah's pursuit of felony charges represents a potential shift in strategy by states that have primarily pursued civil actions against prediction market operators, said Wallach, a lawyer who specializes in sports wagering and gaming law and teaches at the University of Miami School of Law.

Wallach said he expects to see states bring more cases like Utah's and that Utah's criminal charges "could be a bellwether for how other states approach Kalshi and Polymarket" following Nevada's appellate court victory.

Kalshi sued Utah in February, asking a federal judge to prevent the state from enforcing its gambling restrictions on the platform. The lawsuit came as Utah was on the verge of enacting legislation intended to undercut prediction markets from doing business in the state.

A federal judge rejected the request, saying the federal law that Kalshi cited in its argument, the Commodity Exchange Act, doesn't prevent the state from enforcing its laws. The 10th U.S. Circuit Court of Appeals in Denver last month declined to halt Utah's regulatory enforcement during Kalshi's appeal.

Last week, Utah also sued Kalshi and several related companies, asking a state court to stop the platform from trading on sports, elections, politics, culture and other outcomes in Utah, and to use a court-approved geolocation provider to enforce it.

The attorney general's office also asked the court to make the defendants give up the profits they made in Utah.

___

Follow Marc Levy at http://twitter.com/timelywriter