Kalshi Founders Hit With 13 Felony Counts After 12 Undercover Sports Bets in Utah Gambling Probe

Utah prosecutors filed 13 felony counts against prediction market Kalshi and its two co-founders on Wednesday. The charges follow 12 sports wagers placed by an undercover state investigator in September.

Attorney General Derek Brown alleges the company illegally promoted online gambling in violation of Utah law. The complaint names Kalshi founders Tarek Mansour, its chief executive, and Luana Lopes Lara, its chief operating officer.

A further misdemeanour charge brings the total to 14 counts, escalating a dispute over whether states can regulate federally registered prediction markets.

The prosecution follows months of litigation between Kalshi and Utah, which maintains some of America's strictest gambling restrictions.

A federal judge rejected the company's attempt to prevent state enforcement in August. On Tuesday, the Commodity Futures Trading Commission (CFTC) sued Utah, arguing that the state was interfering with federal regulatory authority.

Kalshi Undercover Sports Bets Form Basis of Felony Charges

According to the criminal complaint filed in Salt Lake County, state investigator Scott Eggerman opened an undercover Kalshi account on 13 September. He used an assumed identity, a Utah residential address, a local telephone number and banking details identifying him as a state resident.

The investigator placed 12 wagers involving football, baseball, soccer and hockey while operating from Salt Lake and Davis counties. Prosecutors allege Kalshi allowed the transactions after confirming his location in Utah and collected fees from the wagers.

The complaint includes 12 third-degree felony counts of online gambling promotion and one second-degree felony count alleging a pattern of unlawful activity. A separate class A misdemeanour count concerns general gambling promotion.

Brown accused Kalshi of continuing to serve Utah customers despite an earlier federal court ruling permitting the state to enforce its gambling restrictions.

'Gambling is illegal in Utah, whether you place the bet, run the game, or promote it,' Brown said in a statement.

Kalshi rejected the allegations, describing the prosecution as a 'crazy overreach' and saying 'Utah is clearly playing politics'. The company said it intended to challenge the charges in court, maintaining that its operations fall under federal commodities regulation.

Kalshi Gambling Dispute Deepens Federal and State Regulatory Clash

The legal disagreement centres on whether Kalshi's event contracts should be treated as federally regulated financial products or gambling activities subject to state restrictions.

Kalshi argues that its platform operates under the Commodity Exchange Act and the CFTC's oversight. Utah maintains that contracts linked to sports, elections and other outcomes can constitute unlawful gambling regardless of their financial-market classification.

The state's constitution prohibits the legalisation of gambling, leaving little room for conventional sports betting operations.

Kalshi sued Utah in February, seeking protection against enforcement of state gambling laws. A federal judge rejected that request in August, finding that the legislation cited by Kalshi did not prevent Utah from applying its restrictions.

The 10th US Circuit Court of Appeals subsequently declined to suspend enforcement while the company pursued its appeal.

Utah filed a separate civil lawsuit last week seeking to restrict Kalshi's activities involving sports, elections, politics and other event contracts. The state also requested geolocation measures and the recovery of profits it alleges were unlawfully obtained.

The CFTC responded with its own lawsuit on Tuesday, asserting that federal law gives the agency authority over regulated prediction markets. That action placed federal regulators in direct conflict with Utah one day before the criminal charges were announced.

Kalshi Felony Prosecution Raises Questions for Other States

Utah is not the first state to pursue criminal proceedings against Kalshi. Arizona previously brought misdemeanour charges alleging illegal gambling operations, although a federal judge subsequently halted that prosecution.

Utah's felony case carries potentially greater criminal consequences for the individuals named in the complaint.

Daniel Wallach, a lawyer specialising in sports wagering and gaming law, said the Utah prosecution 'could be a bellwether for how other states approach Kalshi and Polymarket'.

The dispute has also reached federal appeals courts. In August, the 9th US Circuit Court of Appeals declined to restore Kalshi's protection against Nevada's regulation of sports-event contracts. It referred separate questions concerning election contracts to a lower court.

The differing legal approaches have left prediction market operators facing uncertainty across multiple states. New Jersey has also sought US Supreme Court review of the jurisdictional dispute, although the court has not agreed to resolve it.

Mansour and Lopes Lara have been issued summonses to respond to the charges in Utah's Third District Court in Salt Lake County.

Authorities did not issue arrest warrants in connection with the filing. Prosecutors have not publicly specified what penalties they intend to seek.

The criminal case will proceed against the backdrop of separate litigation over the extent of state and federal regulatory powers. Kalshi continues to argue that federal oversight should take precedence, while Utah maintains that its gambling restrictions remain enforceable.

For the company's founders, the dispute now extends beyond civil enforcement and regulatory compliance into criminal proceedings. The allegations remain unproven, and the courts have yet to determine the outcome of Utah's prosecution.