The American state of Utah has escalated its long-running dispute with prediction market platform Kalshi, filing 14 criminal charges on Wednesday against the company and its two co-founders, Tarek Mansour and Luana Lopes Lara. The charges include one second-degree felony for "pattern of unlawful criminal activity," 12 third-degree felonies for "online gambling promotion," and one class A misdemeanor for "general gambling promotion."
The case represents a significant escalation in the regulatory war between U.S. states and prediction markets, and could set precedent that echoes across the entire industry. The charges follow a months-long investigation that culminated with Utah Attorney General's Office investigator Scott Eggerman creating an "undercover" Kalshi account on September 13, 2026, using a Utah IP address and a Visa debit card, and successfully placing multiple sports event bets.
Utah Attorney General Derek Brown, a Republican, said in a statement that "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." Brown added that "a federal court has already ruled that Utah's gambling laws apply to Kalshi" and that the platform "continued to accept bets from Utahns despite the ruling."
Kalshi responded by calling the charges "crazy overreach" and accusing Utah of "playing politics." The company has long maintained that prediction markets fall under exclusive federal jurisdiction and are not subject to state gambling laws.
The case sits within a broader dispute over who regulates prediction markets in the United States. In October, the Commodity Futures Trading Commission (CFTC) sued Utah to block enforcement of state laws against Kalshi, arguing that the platform is a CFTC-registered designated contract market and therefore operates above state law. The CFTC has already sued at least 10 states, including Utah, under the same logic.
Kalshi has maintained for years that sports bets traded on its platform are not gambling but a type of financial derivative subject to CFTC federal regulation, not state supervision. Utah and several other states disagree, arguing that prediction markets like Kalshi are subject to state gambling laws and associated taxes.
The legal battle has spread across roughly 20 states, creating a fragmented regulatory landscape that analysts say will likely be resolved by the U.S. Supreme Court. Arizona became the first state to file criminal charges against Kalshi earlier this year, accusing it of operating an illegal gambling business within its borders — a case a judge subsequently put on hold. Nevada also took action, with an appeals court refusing to let Kalshi restart trading on sports and election events in the state.
The Utah-Kalshi case gained additional significance in the context of federal politics. Under President Donald Trump, the federal agency responsible for regulating financial markets has shown a more favorable posture toward prediction markets, with the CFTC aggressively expanding its position against state regulation. The very nomination of Rostin Behnam to lead the CFTC reflected that shift in approach toward sectors previously ignored or hostilely treated by state regulators.
According to Benjamin Wolf, an attorney specializing in sports wagering law, Utah's approach represents a "potential shift in strategy" by states that had previously opted for civil actions against prediction market operators. Criminal charges, with the possibility of jail time for co-founders, dramatically raise the personal risk executives in the industry face.
For investors and regulators in the AI and financial markets sector, the Kalshi case raises fundamental questions: if a federally registered prediction market can be criminally prosecuted by a state, what regulatory protection really exists for companies operating in these emerging markets? The Supreme Court's response will be a regulatory milestone that defines not just the future of Kalshi, but an entire class of digital financial instruments.
Sources: Al Jazeera, The Guardian, CoinDesk
✓ Independent sources cross-checked and verified before publishing
