Utah deploys criminal charges against Kalshi and founders after $115 undercover sports wagers

Utah has filed 14 criminal counts each against prediction market operator Kalshi, CEO Tarek Mansour, and COO Luana Lopes Lara. The charges, which include a second-degree felony count of pattern of unlawful activity, follow an undercover investigation in which a state investigator placed 12 sports wagers totaling approximately $115 on NFL, college football, MLB, MLS, and NHL events between September 13 and 26.

The investigator used a local address, phone number, and debit card, confirmed his Utah location via IP and geolocation, and acknowledged the platform's location check before placing the first $10 wager. Kalshi collected fees ranging from $0.03 to $0.78 per transaction, which prosecutors cite as evidence of revenue from activity deemed illegal gambling under state law.

As reported by Gambling Insider, former CFTC special counsel Peter Sanchez Guarda said the case reflects states evolving their tactics against operators that have taken regulators to federal court. "States are evolving their tactics. Criminal cases are harder to prove than civil cases, but they are also less likely to be moved to federal court."

Utah Attorney General Derek Brown stated that federal registration offers no shield. "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. A federal court has already ruled that Utah’s gambling laws apply to Kalshi. Kalshi kept taking bets from Utahns anyway."

Kalshi federal lawsuits prompt state shift to criminal enforcement

Kalshi's pattern of filing federal suits against state regulators began after initial warning letters. Some states responded with civil actions in state court, but those remained vulnerable to removal. Criminal proceedings raise the burden of proof to beyond a reasonable doubt yet reduce the chance of transfer to federal court. Utah follows Arizona as the second state to bring criminal charges, though the CFTC obtained a preliminary injunction blocking Arizona's effort.

The complaint names Mansour and Lopes Lara personally, citing their public statements describing control over strategy, operations, employees, product development, engineering, markets, and marketing. Charges against the individuals invoke Utah Code provisions on causing unlawful conduct, while the company faces liability for conduct authorized by senior management. Prosecutors must still establish the required mental state of intent or knowledge.

The CFTC has filed an emergency motion to restrain Utah's enforcement against CFTC-regulated entities. Sanchez Guarda noted the obstacle of the Younger abstention doctrine, which generally discourages federal courts from intervening in state criminal cases, though it does not wholly preclude federal action to protect federal interests. The motion is pending before the same federal judge who previously ruled that the Commodity Exchange Act does not preempt Utah's gambling laws as applied to Kalshi's sports contracts.

Preemption conflict and path to higher review

Federal and state courts have reached differing conclusions on whether CFTC oversight of event contracts shields operators from state gambling restrictions. Sanchez Guarda observed that this split of authority increases the likelihood of Supreme Court consideration. "The differing federal and state court decisions create a ‘split of authority’ which makes the case more likely to be heard by the Supreme Court. If the Supreme Court decides that the types of prediction markets (sports, elections, etc.) that Kalshi is being prosecuted for in Utah are legal, then it would prevent Utah’s state level criminal prosecution."

Utah's separate civil suit seeks to bar Kalshi's sports, election, politics, culture, and mentions-based contracts. It alleges 32,940 accounts tied to Utah addresses, with estimated fees collected between $30.6 million and $61.2 million and approximately $5.5 million in customer losses. Brown added that the state's approach has already led some online gambling platforms to exit Utah.

Kalshi has called the charges a politically motivated overreach and expects to prevail in court as it did in Arizona. The unresolved preemption question leaves operators exposed to varying rules by jurisdiction, with criminal liability now extending to named executives. Until federal courts or the Supreme Court deliver consistent clarity, platforms must treat state gambling prohibitions as an active enforcement risk rather than a settled federal override.