What did Utah charge Kalshi with?
Utah's attorney general filed 14 criminal counts on Wednesday, Oct. 28, against the prediction market Kalshi and its two co-founders. Thirteen of the counts are felonies, according to charging documents obtained by FOX 13 News.
The counts break down by charge. There is one count of a second-degree felony pattern of unlawful activity. There are 12 counts of online gambling promotion, each a third-degree felony. A final count of general gambling promotion is a class A misdemeanor.
The named defendants are KalshiEX LLC, chief executive Tarek Mansour and chief operating officer Luana Lopes Lara. Utah charged the exchange entity rather than the parent company, Kalshi Inc.
Prosecutors built the case with an undercover account. An investigator named Scott Eggerman used a Utah IP address, a Utah phone number, a Utah home address and a debit card from a Utah bank, according to the probable cause affidavit.
Kalshi asked the agent to confirm his location through location services before he could trade. He placed wagers in Salt Lake and Davis counties, the affidavit says.
The Salt Lake Tribune reported that the agent wagered $114 across 12 bets over two weeks. One was a Sept. 26 NHL game between the Utah Mammoth and the Colorado Avalanche.
The affidavit ties the fees to the felony theory. It says Kalshi received proceeds from a pattern of unlawful activity through the fees it charged on each wager. It adds that Mansour, as chief executive, maintained control of that enterprise.
"Gambling is illegal in Utah, whether you place the bet, run the game, or promote it," Attorney General Derek Brown said in a statement. He argued that federal registration does not place a company above state law.
Kalshi rejected the charges in blunt terms. "This is a crazy overreach; Utah is clearly playing politics," the company said. It added that it would "put a stop to this in court, just like we did in Arizona."
The counts are allegations, not findings, and all defendants are presumed innocent. The attorney general's office did not immediately say what penalties it would seek, the Associated Press reported. The charges open the possibility of jail time.
Why did the CFTC sue Utah one day earlier?
The federal response came first. The Commodity Futures Trading Commission, joined by the United States, sued Utah in federal court. The complaint was filed Oct. 26 and announced on Oct. 27, a day before the criminal counts.
The case is United States v. State of Utah, No. 2:26-cv-01055, in the District of Utah. It names the state and Brown in his official capacity.
The complaint argues that event contracts are swaps under the Commodity Exchange Act. It says the law gives the CFTC exclusive jurisdiction over swaps traded on designated contract markets, or DCMs. On that reading, state gambling law is preempted as applied to those contracts.
Utah's own civil suit, filed Oct. 20, is the immediate trigger. Brown v. Kalshi Inc., No. 260908356, names Kalshi entities and two Susquehanna entities. It seeks to stop Kalshi from offering sports, election and other event contracts to Utah residents.
Utah's complaint calls Kalshi "the manager of a back-alley gambling den" and asks for a jury trial. It wants a declaration that the contracts are illegal, injunctions against them and restitution for residents.
The CFTC wants a judge to halt the state case and any investigation of CFTC-regulated venues and their partners. It also wants a declaration that Utah's gambling laws cannot reach federally approved contracts.
The complaint stresses timing and harm. It says Utah's action threatens to wipe out the operation of federally regulated exchanges inside the state. It calls that injury irreparable and argues that enforcing a preempted state law is never in the public interest.
"Utah seeks to shut down prediction markets across a wide variety of markets," CFTC Chairman Michael S. Selig said in the release.
The agency said it has opened proceedings against nine other states. It also said it has filed briefs in four federal appeals courts and one state supreme court.
Utah's civil complaint puts numbers on the dispute. About 55,800 accounts had registered with a Utah address by February, and those accounts had placed more than 5 million wagers by Feb. 25, KSL.com reported. The state estimates Kalshi collected $30.6 million to $61.2 million in fees.
The state also alleges Kalshi earned at least $5.5 million in gambling profits from Utah residents by May 2026. Those figures come from Utah's complaint and have not been tested in court.
Governor Spencer Cox has called prediction markets "gambling – pure and simple" and said they have no place in Utah, The Guardian reported. Utah's constitution bans gambling, and Brown has said it is one of two states with such a prohibition.
How did Kalshi end up in a Utah courtroom?
Kalshi is not an unregulated offshore site. The CFTC designated it as a contract market on Nov. 3, 2020, according to the federal complaint. Thirty exchanges currently hold active designations.
Exchanges may self-certify new contracts, and the CFTC can review them afterward. The agency says it monitors thousands of event contracts and can order one removed if it falls outside the swap definition.
Users buy yes or no positions on an event. The exchange matches trades and charges a fee, rather than taking the other side of a bet. Kalshi calls that structure the core of its defense.
Sports changed the business. Kalshi began listing sports bets in January 2025, New Jersey's Supreme Court petition says. That filing also says sports accounted for 90% of its 2025 trades and 95% of revenue, citing the Ninth Circuit's opinion.
The company marketed itself aggressively. New Jersey's petition quotes Kalshi calling itself "the first app for legal sports betting in all 50 states" and the "First Nationwide Legal Sports Betting Platform."
Kalshi struck first in court. It sued Cox and Brown in February 2026, arguing that federal law barred Utah from enforcing its gambling statutes. A federal judge rejected the request, and the Tenth Circuit declined to pause enforcement in September, the AP reported.
The timing was not random. Kalshi filed that suit as Utah moved toward legislation meant to limit prediction markets, the AP reported.
Utah went on offense this month. It filed its civil suit on Oct. 20. The CFTC sued the state on Oct. 26. The criminal counts arrived on Oct. 28. Three proceedings now overlap inside nine days.
Kalshi says a shutdown would be chaotic. Xavier Sottile, its head of markets, said in an April declaration that voiding Utah trades would harm users across the exchange, KSL.com reported. He said Kalshi does not bet against customers and only collects disclosed fees.
The exchange also argues that a state cannot unwind trades already matched between users. It told the court that compliance would require voiding and refunding every Utah-origin trade, which it called impossible or irreparably harmful.
Why do federal appeals courts disagree about prediction markets?
Two circuits have read the same 2010 statute in opposite ways. The Third Circuit ruled 2-1 on April 6, 2026, that sports event contracts are swaps and that federal law preempts New Jersey's gambling statute.
Its reasoning rested on two preemption theories, according to New Jersey's petition. The majority found that federal law displaces state gambling rules and that applying state law would obstruct Congress's intent.
The Ninth Circuit disagreed on Aug. 28, 2026. It upheld a decision dissolving an injunction that had shielded Kalshi from Nevada regulators. "The sports event contracts were not 'swaps' because they were sports bets," the panel wrote.
The Ninth Circuit relied on context as well as text. It noted that Congress has legislated on gambling repeatedly and specifically. It found no sign that a Wall Street reform bill silently displaced those laws.
The panel also pointed to a CFTC rule. Regulation 40.11 bars swaps that reference gaming. The court said Kalshi's self-certification and listing of the contracts was unlawful under that rule. It sent election contracts back to the district court.
The Sixth Circuit added doubt. It refused to stay a case in April and noted that judges around the country had fractured on the question, according to the New Jersey petition.
The CFTC is trying to settle the issue through rulemaking. On Oct. 9 it proposed defining swaps to include event contracts based on sports, politics, culture and weather. It also issued an interim final rule that excludes casino and sportsbook wagers.
States are not persuaded. Attorneys general from 44 states told the CFTC that the proposal exceeds its authority. Ohio's Andy Wilson led the letter, and Florida, Georgia, New Hampshire, Missouri and Texas did not sign, CNBC reported.
The Supreme Court is now the likely arbiter. New Jersey petitioned on Sept. 2, and the case is docketed as No. 26-299. Kalshi's response is due Nov. 9.
The filings show the stakes. The NFL, former Senator Christopher Dodd, former CFTC chairman Gary Gensler, 145 tribal governments and the American Gaming Association all filed briefs, according to the docket.
Who is affected by the Utah case?
Utah customers are the most immediate group. The state's complaint counts about 55,800 accounts tied to Utah addresses. A criminal conviction or civil injunction could end access for those users and complicate refunds.
Kalshi's investors are watching closely. The Guardian reported in May 2026 that the company had recently been valued at $22 billion. Growth has been fast: New Jersey's petition says Kalshi processed more than $17 billion in volume during the first two weeks of the 2026 World Cup, with fees above $10 million a day.
Competitors face the same legal question. Robinhood said it would appeal the Ninth Circuit ruling, and shares of DraftKings and Flutter rose after it, CNBC reported. Both companies have been building their own prediction market products.
States face a choice about enforcement. Litigation now spans roughly 20 states, the AP reported. The pattern varies: some states filed suit, while others began with cease-and-desist letters, as Nevada did.
Tribes and casinos have joined the fight. They argue that a federal green light for sports contracts would undercut compacts and state-licensed sportsbooks. Their briefs at the Supreme Court make that case.
Sports leagues are also exposed. The CFTC has signed market-integrity agreements with the NBA, MLB and NHL, the federal complaint notes, which puts the agency inside a business states have long policed.
The executives named in Utah carry personal exposure. Mansour and Lopes Lara are charged individually, which is unusual in a dispute that has mostly run through licensing and civil courts.
What are the weak points, and what happens next?
Kalshi's core argument has lost in the courts that matter most to Utah. A federal judge there and the Tenth Circuit declined to block state enforcement. The Ninth Circuit then rejected the same theory for sports contracts.
Its best precedent sits in the Third Circuit. That ruling covers New Jersey, not Utah, and the Supreme Court has not adopted it. A favorable grant of review would change the arithmetic quickly.
Utah's case has its own vulnerabilities. Arizona filed criminal charges first, and a federal judge blocked that prosecution, Kalshi noted in its statement. Utah must also prove promotion and a pattern of unlawful activity, not just operation.
The legal analyst Daniel Wallach expects more states to follow Utah. He told the AP that felony charges could be "a bellwether for how other states approach Kalshi and Polymarket."
Timing matters for all sides. Kalshi's Supreme Court response is due Nov. 9. The justices could deny the petition, which would leave the circuit split in place, or grant review for a later term.
A denial would preserve a patchwork. The same sports contract would stay lawful in the Third Circuit's states and exposed in the Ninth Circuit's. Kalshi's own appeal of its Utah loss is still pending at the Tenth Circuit.
The Utah federal case will move sooner. The CFTC has asked for declaratory and injunctive relief. A ruling either way would shape whether the state's civil and criminal cases can proceed.
The criminal case has no announced schedule. Apart from its statement that it will fight in court, Kalshi has not said how it will respond to the counts.
Watch three signals. First, whether other states file felony counts. Second, whether Kalshi geoblocks Utah or keeps taking trades. Third, whether the CFTC finalizes its swap rule, which could moot part of the fight.
For now, the practical answer for a Utah user is unsettled. Kalshi still describes its markets as federally regulated, and Utah still calls them illegal gambling. A judge, and perhaps the Supreme Court, will decide which label sticks.