Utah Criminally Charges Kalshi, Two Co-Founders Over Illegal Sports Gambling
Summary
- Utah has criminally charged prediction-market platform Kalshi and its two co-founders over alleged illegal gambling.
- Kalshi has maintained that event contracts tied to outcomes such as sports, elections, economic indicators and weather are financial derivatives and that state governments have no authority to regulate them.
- As Arizona, Connecticut, Massachusetts, Michigan and Nevada also move forward with criminal charges, civil lawsuits or access blocks, the CFTC has sued Utah, arguing that regulatory authority over event contracts belongs to the federal government.
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Utah has criminally charged prediction-market platform Kalshi and its two co-founders over alleged illegal gambling. The move follows a civil lawsuit seeking to halt the company's operations in the state and recover its profits, escalating a clash between state governments and federal regulators over prediction markets.
CoinDesk reported on Oct. 29 that Utah prosecutors filed 14 charges against KalshiEX LLC and co-founders Tarek Mansour and Luana Lopes Lara. The counts include one felony charge for a pattern of unlawful activity, 12 counts of promoting online gambling and one gambling-related misdemeanor.
The investigation was based on sports-related trades placed directly by an undercover investigator. An investigator with the Utah Attorney General's Office used Kalshi with a local address, phone number and debit card to place 12 sports bets. Prosecutors cited those transactions as evidence that Kalshi promoted illegal gambling within the state.
At the center of the dispute is whether contracts tied to sports outcomes should be treated as financial products or gambling. Kalshi is a federally authorized exchange regulated by the Commodity Futures Trading Commission and offers event contracts settled on the outcomes of sports, elections, economic indicators and weather. The company has maintained that its sports-related contracts qualify as financial derivatives and that state governments have no authority to regulate them.
Utah had already filed a civil lawsuit seeking to stop Kalshi's betting operations in the state and claw back its profits. It escalated its response by pursuing criminal charges just days later.
The dispute between Kalshi and state authorities is spreading across the US. Arizona, Connecticut, Massachusetts, Michigan and Nevada have also taken steps including criminal charges, civil lawsuits and access blocks. The CFTC, by contrast, has sued Utah, arguing that regulatory authority over event contracts rests with the federal government.
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