The state's attorney general accuses the prediction market of promoting illegal online gambling, one day after federal regulators sued Utah
Utah has escalated its fight with Kalshi from a lawsuit to a criminal case.
On October 28, Utah Attorney General Derek Brown filed criminal charges against KalshiEX LLC and its two co-founders, CEO Tarek Mansour and COO Luana Lopes Lara. The state accuses the prediction market platform of illegally promoting online gambling.
The timing is hard to miss. The charges landed a day after the US Commodity Futures Trading Commission sued to stop Utah from enforcing its anti-gambling laws against the company.
An undercover agent and a dozen bets
The case centers on a sting. According to the charging documents, an undercover state agent opened a Kalshi account in September while confirming a Utah residence.
That agent then placed 12 wagers on sports-related events.
Brown, a Republican, brought a total of 14 counts:
- One count of pattern of unlawful activity
- Twelve counts of online gambling promotion, one for each wager the agent placed
- One count of general gambling promotion
Naming the co-founders personally raises the stakes considerably. A civil dispute puts a company’s money at risk. A criminal case puts named executives in the crosshairs.
A fight that has been building for months
The criminal filing did not come out of nowhere. Utah filed a civil lawsuit against Kalshi on October 20, seeking to block the platform’s operations in the state.
That suit also asks the court to force Kalshi to geofence Utah users.
Utah is also trying to recover fees. The civil complaint estimates Kalshi collected between $30.5 million and $61.1 million from Utah users between February and mid-October 2026.
The courts have so far leaned Utah’s way. On August 4, a federal judge ruled that Utah’s anti-gambling laws apply to Kalshi’s contracts.
Kalshi then sought a stay of that ruling. The Tenth Circuit denied it on September 8, leaving the decision in force while the broader dispute continues.
Then Washington stepped in. The CFTC and the US Department of Justice jointly sued Utah, arguing that the Commodity Exchange Act preempts state gambling laws when it comes to federally regulated contracts.
Utah responded within a day by filing criminal charges.
Utah is the tenth state to face legal action from the CFTC over similar jurisdictional questions about prediction markets and gambling law.
Kalshi’s argument: this is finance, not a sportsbook
Kalshi has pushed back hard. The company has characterized Utah’s actions as political and as an overreach of state authority.
Its core defense rests on its regulatory status. Kalshi was founded in 2018 and became a CFTC-approved designated contract market in 2020.
A designated contract market is an exchange licensed by the federal government to list futures and similar derivatives. Think of it as the same regulatory category that covers traditional commodity exchanges, rather than the one that covers casinos.
Kalshi’s position is that its event contracts, including those tied to sports outcomes, are derivatives under federal oversight. Under that view, states have no business applying their own gambling rules to them.
Utah sees it differently. To the state, a contract that pays out based on who wins a game looks a lot like a sports bet, regardless of what the paperwork calls it.
What this means for prediction markets
The immediate risk for Kalshi is obvious. Criminal charges against its two co-founders add personal legal exposure on top of a civil suit seeking tens of millions of dollars.
There is also an awkward institutional dynamic at play. A federal regulator and the Justice Department are on one side, and a state attorney general armed with criminal law is on the other.
The Tenth Circuit is already involved in the broader dispute.
For traders and investors watching the sector, three things matter most. The first is how courts handle the CFTC and DOJ preemption suit. The second is whether Utah’s criminal case moves forward or gets paused pending that federal fight. The third is whether other states follow Utah’s lead and reach for criminal statutes rather than civil ones.
The undercover sting may prove the most consequential detail. It shows a state willing to build a case bet by bet, and it hands other attorneys general a ready-made template if they want one.
