Utah Files Felony Charges Against Kalshi, Co-Founders Over Sports Bets
Utah has filed felony charges against prediction market Kalshi and its co-founders Tarek Mansour and Luana Lopes Lara, accusing them of illegally promoting gambling in the state.
The company faces one count of pattern of unlawful activity, a second-degree felony, 12 counts of online gambling promotion, a third-degree felony, and one count of gambling promotion, a misdemeanor. The charges stem from an undercover operation in September when a Utah state agent placed 12 wagers on NFL and college games after passing a location verification check.
State's Gambling Laws
Utah's constitution strictly prohibits gambling, and state authorities maintain that prediction markets operating within its borders are illegal regardless of federal registration. 'Gambling is illegal in Utah, whether you place the bet, run the game, or promote it,' stated Utah Attorney General Derek Brown. 'Calling it a 'prediction market' doesn't change what it is, and being federally registered doesn't put a company above the law.'
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.
Federal Dispute
The criminal charges escalate an ongoing legal battle between Utah and federal regulators. The Commodity Futures Trading Commission (CFTC) sued Utah on Tuesday to block its enforcement actions against federally registered exchanges, marking the 10th state the agency has taken to court. 'Congress entrusted the CFTC to be the federal regulator with sole responsibility to oversee these markets,' said CFTC Chairman Michael Selig.
Kalshi responded to the charges by calling them 'a crazy overreach' and suggested Utah is 'clearly playing politics.' The company vowed to fight the charges in court, referencing a previous victory in Arizona where it successfully blocked similar enforcement actions.
This is a crazy overreach; Utah is clearly playing politics. We look forward to putting a stop to this in court, just like we did in Arizona.
Legal Uncertainty
Federal courts remain divided on whether states can apply gambling laws to prediction markets. While a Third Circuit ruling prevented New Jersey from regulating sports contracts on such platforms, other circuits have sided with states like Ohio, Tennessee and Nevada. New Jersey has now asked the Supreme Court to settle the question, backed by 39 other states and the District of Columbia.
The legal uncertainty continues to grow as different jurisdictions issue conflicting rulings. 'Different judges in different places say different things,' noted Isaac Rose-Berman, a gambling policy fellow. 'It's just going to keep escalating and eventually get to the Supreme Court.' The outcome could determine whether prediction markets can operate freely across state lines or remain subject to varying state gambling regulations.
Related
