Utah files criminal charges against Kalshi amid state rights battle

Utah has filed criminal charges against prediction market company Kalshi and two of its co-founders, escalating a legal battle over whether states can regulate event contracts as gambling.The charges come after the U.S. Court of Appeals for the 10th Circuit ruled in August that federal commodities law did not preempt Utah’s authority to regulate Kalshi’s sports event contracts under state gambling laws. Kalshi is currently appealing the decision. At the same time, the Commodity Futures Trading Commission sued Utah on Tuesday, arguing that federal law gives the CFTC exclusive authority over the markets and preempts state enforcement.The competing legal actions, unfolding in the weeks before the midterm elections, reflect a broader fight over whether prediction markets are federally regulated financial instruments or a form of gambling subject to state laws. As litigation unfolds across the country, legal analysts expect the Supreme Court to step in and resolve the regulatory rules for prediction markets. Utah Attorney General Derek Brown, a Republican, filed the criminal case Wednesday against Kalshi CEO Tarek Mansour and co-founder Luana Lopes Lara. The charges include one count of pattern of unlawful activity, 12 counts of online gambling promotion, and one count of general gambling promotion.Kalshi pushed back against the prosecution, calling it a “crazy overreach” in a statement to the Washington Examiner.“Utah is clearly playing politics,” the company spokesperson said. “We look forward to putting a stop to this in court, just like we did in Arizona.”The company’s reference to Arizona concerns an earlier prosecution that could offer a preview of the legal fight ahead. In March, Arizona Attorney General Kris Mayes, a Democrat, filed 20 misdemeanor charges against Kalshi related to alleged illegal gambling and election wagering. Kalshi had filed a federal lawsuit against Arizona before the criminal charges were brought, and a federal judge subsequently issued an injunction blocking the state prosecution. Arizona is appealing that order.The criminal charges follow an Aug. 4 summary judgment by U.S. District Judge Robert Shelby, who ruled that federal commodities law did not preempt Utah’s authority to regulate Kalshi’s sports event contracts under state gambling laws.Kalshi appealed the decision in the 10th Circuit, seeking an emergency injunction to prevent Utah from enforcing its laws while the appeal proceeded. But on Sept. 8, a two-judge appellate panel denied that request, leaving the Beehive State free to enforce its gambling laws against the company’s sports contracts while the broader appeal remains pending.The dispute has since drawn support from other states for Utah, concerned about the implications of Kalshi’s argument that federal law displaces state gambling regulations.Ohio, Nevada, and roughly 35 other states, along with the District of Columbia and the Northern Mariana Islands, filed an amicus brief in the 10th Circuit on Wednesday. The states said they have an interest in the case because Kalshi’s expansive interpretation of federal preemption threatens their long-standing authority to protect residents through their own gambling laws.“Hundreds of years ago, sailors aboard Columbus’s ships played games of chance to pass the time,” the brief read. “Ever since those explorers crossed the Atlantic, Americans have engaged in gambling. And all along, States have taken different regulatory approaches under their traditional police powers.”Federal government challenges Utah’s authority The state’s criminal prosecution is unfolding alongside a separate federal lawsuit challenging Utah’s enforcement campaign.The CFTC and Justice Department sued Utah and Brown in federal court on Tuesday, arguing that the Commodity Exchange Act gives the CFTC exclusive jurisdiction over the markets and that Utah’s enforcement efforts, including its civil lawsuit against Kalshi, are preempted by federal law.CFTC Chairman Michael S. Selig said the agency would defend its authority over event contracts.“Utah seeks to shut down prediction markets across a wide variety of markets,” Selig said. “Event contracts do not just serve hedging and investment purposes — they also provide the public with information about the outcome of future events.”Congress entrusted the CFTC with “sole responsibility to oversee these markets,” he said, adding that the agency has the expertise and responsibility to defend its jurisdiction over commodity derivatives.The federal lawsuit is part of a broader dispute in which the CFTC has challenged enforcement efforts by 10 states seeking to apply gambling restrictions to prediction markets.Utah argues that gambling threatens citizens In a separate civil case filed Oct. 20, Utah has sought to stop Kalshi and other defendants from offering a broad range of event contracts to state residents, including contracts tied to sports, elections, politics, culture, and mentions.Utah is seeking an injunction, court-approved geolocation enforcement, restitution and other damages, and the disgorgement of fees and profits. The state has estimated that Kalshi generated between $30 million and $61 million from Utah accounts.Utah has also declared gambling a public nuisance. Brown argued that online platforms make gambling readily accessible in ways that heighten the potential for harm.“Gambling no longer lingers in distant casinos or back rooms,” Brown wrote. “Today it grabs Utahns instantly through phones and online platforms designed to draw people in before they recognize the risks.”2026 MIDTERM ELECTIONS LIVE UPDATES: LATEST NEWS, RESULTS, AND ANALYSISBrown cited national figures showing that online gambling participation increased from 15% of adults in 2018 to 22% in 2024. He also pointed to a platform’s public report of more than 30,000 Utah account holders as of February 2026.“No Utah law authorizes, licenses, or approves that activity,” he wrote.