KEY TAKEAWAYS
- Utah is pursuing 13 felony charges and one misdemeanor count against Kalshi, alleging an investigator was able to place sports bets on the platform in violation of the state’s strict anti-gambling laws.
- Utah is the second state to file a criminal suit against Kalshi, and its felony charges are more serious than the 20 misdemeanor counts brought by Arizona earlier this year.
- Kalshi described Utah’s actions as “a crazy overreach” and said it looks forward to winning in court.
Utah wants Kalshi charged with second-degree and third-degree felonies.
The Republican anti-gambling state escalated its war with the prediction markets industry on Wednesday by filing 14 criminal charges against Kalshi. The complaint also names the prediction market operator’s two co-founders, CEO Tarek Mansour and COO Luana Lopes Lara, as co-defendants.
Utah turned up the heat after several developments in recent days. Attorney General Derek Brown filed a civil lawsuit in state court last week against Kalshi, some of its affiliated entities, and two Susquehanna trading firms.
Then, on Monday, the U.S. Department of Justice and the Commodity Futures Trading Commission (CFTC) sued Brown in federal court in an attempt to stop the state from pursuing enforcement action against its registrant. Crypto.com and its trading exchange OG.com also filed separate lawsuits.
Now, Utah has stepped up its crusade from a civil lawsuit to criminal charges. It also raised the stakes compared to the misdemeanor charges that Arizona tried to bring against Kalshi earlier this year.
What felony charges does Utah allege against Kalshi?
In a filing with the Third Judicial District Court in Salt Lake City on Wednesday, Brown’s office alleges illegal gambling operations. It detailed 14 alleged counts of criminal activity, including:
- One second-degree felony charge of “pattern of unlawful activity”
- 12 third-degree felony charges of “online gambling promotion”
- A class A misdemeanor charge of “general gambling promotion”
Brown’s office stated that an undercover investigator was able to create a Kalshi account using an in-state address and placed 12 sports wagers between Sept. 13 and 26. The bets were not lucrative, totalling approximately $115, but were placed on sports events including NFL, college football (including Utah State games), MLB, and NHL games.
Betting on sport is explicitly illegal in Utah in any form. Brown’s office alleges that Kalshi took the bets and collected fees despite knowing the user was located in the state.
Utah targets Mansour, Lopes by name
Utah also named Mansour and Lopes in the suit, writing that despite the U.S. Court of Appeals for the Tenth Circuit’s denial of Kalshi’s motion for an injunction pending appeal, Kalshi’s co-founders “have continued to provide or offer to provide online gambling to individuals in the State of Utah.”
“As the co-founder and CEO of Kalshi, [Mansour and Lopes] acquired or maintained, directly or indirectly, through a pattern of unlawful activity, an interest in or control of an enterprise, Kalshi … and conducted or participated, whether directly or indirectly, in the conduct of the enterprise’s affairs through a pattern of unlawful activity,” added the filing.
Mansour and Lopes have been issued summons to respond to the charges in court.
The charges follow Utah’s civil lawsuit, which sought to block Kalshi’s operations in the state and recover alleged illegal proceeds. As referenced by its new filing, this all comes after the Tenth Circuit last month denied Kalshi’s request for an injunction pending appeal of an Aug. 4 federal court ruling that granted Utah summary judgment and held that the Commodity Exchange Act (CEA) does not override the state’s gambling laws.
Utah’s criminal charges more serious than Arizona’s
Utah is not the first state to pursue the criminal charges route against Kalshi. In March, Arizona Attorney General Kristin Mayes and Arizona Department of Gaming (ADG) leaders pursued 20 misdemeanor charges against the company in state court, days after Kalshi sued them in federal court.
“Kalshi may brand itself as a ‘prediction market,’ but what it’s actually doing is running an illegal gambling operation and taking bets on Arizona elections, both of which violate Arizona law,” Mayes said at the time. “No company gets to decide for itself which laws to follow.”
Kalshi won an injunction to prevent that action, and a federal judge permanently blocked Mayes from prosecuting Kalshi in May. The CFTC also challenged Arizona’s enforcement efforts in federal court and secured preliminary relief blocking the state’s actions, which Arizona appealed to the Ninth Circuit.
“Arizona’s decision to weaponize state criminal law against companies that comply with federal law sets a dangerous precedent, and the court’s order today sends a clear message that intimidation is not an acceptable tactic to circumvent federal law,” said CFTC Chairman Michael Selig upon securing a temporary restraining order against Arizona in August.
Due to Utah’s stricter laws on gambling in general, its criminal charges are more serious than Arizona’s, with 13 felony accusations to be tried in court.
Kalshi labels Utah’s move ‘a crazy overreach’
In a statement provided to Utah news outlet ABC4, AG Brown reiterated the state’s stance.
“Gambling is illegal in Utah, whether you place the bet, run the game, or promote it,” he said. “Calling it a ‘prediction market’ doesn’t change what it is, and being federally registered doesn’t put a company above the law.
“A federal court has already ruled that Utah’s gambling laws apply to Kalshi. Kalshi kept taking bets from Utahns anyway. That is illegal, and we’re putting a stop to it.”
Kalshi responded to the lawsuit by labeling the move “a crazy overreach.”
“This is a crazy overreach; Utah is clearly playing politics,” said a spokesperson for the company. “We look forward to putting a stop to this in court, just like we did in Arizona.”
