Utah charged Kalshi and its two founders with felonies over sports bets, while the federal government sues the state. The outcome could decide where these apps work.
Utah has filed felony charges against Kalshi, a popular prediction market, and its two co-founders, CEO Tarek Mansour and COO Luana Lopes Lara. Utah Attorney General Derek Brown filed the charges in state court on Wednesday. A day earlier, the federal agency that oversees prediction markets sued Utah to stop it from enforcing its gambling ban against companies like Kalshi.
The company and each co-founder face 13 felony counts and one misdemeanor. The charges are based on sports bets offered on Kalshi between September 13 and September 24. Utah did not issue arrest warrants. The co-founders were instead given summonses to respond in Third District Court in Salt Lake County.
Kalshi called the charges "a crazy overreach" and said Utah is "clearly playing politics." The company said it will fight them in court, as it did in Arizona, where it beat similar charges in May.
Utah prohibits gambling. It is also one of only two states where the state constitution bans it. Brown said Kalshi "runs an online casino in Utah and calls it a prediction market." Last week, Utah also filed a civil lawsuit asking a court to stop Kalshi from offering bets on sports, elections, politics and other events.
The agency is the Commodity Futures Trading Commission, or CFTC. Utah is the 10th state it has sued over this issue. The others are Arizona, Connecticut, Illinois, Kentucky, Minnesota, New Mexico, New York, Rhode Island and Wisconsin. The CFTC says Congress made it the sole federal regulator of these markets, and that Utah is getting in the way.
Courts are weighing two questions. Do the event contracts sold on these sites count as swaps, a type of financial deal the CFTC oversees? And does that federal power override state gambling laws? In August, U.S. District Judge Robert Shelby ruled for Utah and said federal law does not block the state from enforcing its gambling laws.
Kalshi is appealing to the Tenth Circuit court of appeals. On September 8, that court denied its emergency request to pause Utah's ban while the appeal continues. The CFTC is now suing in the same district court that sided with Utah. Its arguments are similar to ones already rejected there, though some other courts have ruled differently.
Utah residents who use Kalshi are the most direct group. The case also matters beyond one state. If Utah can shut down Kalshi, that could cause trouble for rival Polymarket and for sports betting sites like DraftKings and FanDuel. Those two advertise availability in all U.S. states, partly through prediction-market products in states like Utah. Both are registered with the CFTC.
Several fights are running at once: the criminal case, Utah's civil case, the CFTC lawsuit and Kalshi's appeal. The material does not say when the co-founders must answer the charges or when any of these cases will be decided. The Utah attorney general's office declined to comment on the CFTC lawsuit.
Whether states can enforce gambling laws against prediction markets is still undecided, so access to these apps may differ by state until courts settle it.
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