Utah Files Criminal Charges Against Kalshi and Its Founders

Opening Summary

Utah Attorney General Derek Brown has filed 14 criminal charges against prediction market operator KalshiEX, LLC, and its co-founders, Tarek Mansour and Luana Lopes Lara, alleging the company illegally promoted online gambling in violation of state law.

The charges, filed October 28, 2026, follow an undercover investigation in which a state agent placed wagers on sporting events through Kalshi's platform. Prosecutors allege the company collected transaction fees from those wagers despite a federal district court ruling allowing Utah to enforce its gambling laws against Kalshi.

The criminal case arrives amid an escalating dispute over who has jurisdiction over federally regulated prediction markets. Just one day earlier, the Commodity Futures Trading Commission (CFTC) sued Utah to prevent the state from restricting CFTC-registered exchanges.

The allegations have not been proven in court, and Kalshi has disputed the state's actions.

Utah Attorney General Files Criminal Charges Against Kalshi

On October 28, Utah Attorney General Derek Brown's office filed a criminal information in the Third Judicial District Court in Salt Lake County.

The filing names KalshiEX, LLC, CEO Tarek Mansour, and COO Luana Lopes Lara as defendants. Prosecutors accuse the company of promoting illegal gambling through sports-related event contracts offered to Utah residents.

The 14 criminal counts include:

• One second-degree felony: Pattern of unlawful activity.
• Twelve third-degree felonies: Online gambling promotion.
• One Class A misdemeanor: General gambling promotion.

The charges center on allegations that Kalshi facilitated online wagers and collected fees from transactions that Utah considers illegal gambling.

Brown has maintained that operating as a federally regulated financial exchange does not exempt a company from Utah's gambling restrictions.

In a statement reported by Reuters, Brown argued that calling an activity a prediction market does not change its legal character under Utah law.

Kalshi has rejected the prosecution, describing it as political overreach and indicating that it intends to challenge the charges in court.

The filing represents a significant escalation in Utah's efforts to regulate prediction markets, moving beyond civil litigation to criminal allegations against both the company and its executives.

Undercover Investigation Into Kalshi's Sports Prediction Markets

According to the criminal information, Utah Attorney General's Office Special Agent Scott Eggerman created an undercover account on Kalshi on September 13, 2026.

The account used a Utah residential address, phone number, and debit card. Investigators also verified that the agent was accessing the platform from within Utah.

Between September 13 and September 26, the agent placed 12 wagers involving professional and college sporting events.

These included contracts connected to the NFL, NCAA football, Major League Baseball, Major League Soccer, and the NHL.

The charging document describes transactions involving game winners, point spreads, total scores, and individual player performances.

For example, the agent placed a $10 wager involving a Dallas Cowboys and New York Giants game. According to prosecutors, Kalshi charged a $0.44 transaction fee.

Another transaction involved a college football game between Utah and Utah State, with the agent placing a $5 wager on the point spread.

Investigators allege that Kalshi collected a fee for each transaction.

Across the 12 wagers, the agent risked approximately $115 and recorded a net loss of about $25, according to local reporting.

Although the amounts were relatively small, prosecutors are focused on whether Kalshi's business model violated Utah's restrictions on gambling promotion.

The criminal information also alleges that Mansour and Lopes Lara exercised substantial control over the company's operations.

Those allegations form part of the state's case against the individual executives. Whether prosecutors can establish criminal liability remains a question for the court.

Utah's Separate Civil Lawsuit Against Kalshi

The criminal charges follow a separate civil lawsuit filed by Utah against Kalshi and several affiliated companies in October 2026.

In that lawsuit, the state argues that Kalshi's event contracts constitute illegal gambling under Utah law, regardless of the company's federal registration.

Utah's complaint seeks to restrict the platform's operations within the state and recover profits allegedly generated through unlawful transactions.

According to reporting on the civil complaint, the state estimates that Kalshi generated between approximately $30.5 million and $61.1 million from transactions involving Utah accounts between February and October 2026.

Those figures are allegations and estimates presented in the civil litigation, not judicial findings.

The lawsuit also seeks restitution or recovery of allegedly unlawful proceeds and measures to prevent further transactions that Utah considers prohibited gambling.

The state's position reflects its longstanding opposition to gambling, a policy rooted in Utah's history since statehood in 1896.

Utah officials argue that the legal restrictions do not disappear simply because betting activity has moved onto an online financial platform.

The civil lawsuit and criminal prosecution are separate proceedings, but both raise the same central question: Can Utah enforce state gambling laws against a federally regulated prediction market exchange?

Kalshi's Federal Lawsuit Against Utah Officials

Kalshi has also challenged Utah's authority through federal litigation.

On February 23, 2026, Kalshi filed a lawsuit against Utah Governor Spencer Cox and other state officials in the U.S. District Court for the District of Utah.

The company argued that the Commodity Exchange Act preempts state gambling laws when applied to event contracts traded on a federally regulated exchange.

Kalshi's position is that customers trade contracts tied to real-world outcomes through a national derivatives market overseen by the CFTC.

Unlike traditional sportsbooks, where an operator typically sets betting odds, Kalshi maintains that its customers trade with one another and set the prices.

The company argues that allowing a single state to treat its contracts as illegal gambling would undermine the federal regulatory framework governing derivatives markets.

Utah disputes that interpretation.

On August 4, 2026, U.S. District Judge Robert J. Shelby ruled that the Commodity Exchange Act did not preempt Utah's enforcement of its gambling laws against Kalshi.

The federal judge granted summary judgment in favor of Utah officials.

Kalshi appealed the decision to the U.S. Court of Appeals for the Tenth Circuit.

On September 8, the appeals court denied Kalshi's request for an injunction pending appeal.

The criminal information alleges that Kalshi continued offering sports event contracts to Utah residents after those rulings.

However, the broader legal question remains unresolved, with federal courts reaching differing conclusions in litigation involving prediction markets and state gambling restrictions.

CFTC Sues Utah Over Prediction Market Jurisdiction

The conflict intensified on October 27, 2026, when the Commodity Futures Trading Commission filed a lawsuit against Utah officials.

The federal agency seeks to block state enforcement efforts targeting CFTC-registered contract markets.

The CFTC argues that Congress established a federal regulatory system for derivatives exchanges and that state gambling laws cannot override that framework when applied to federally regulated event contracts.

In announcing the lawsuit, CFTC Chairman Michael S. Selig emphasized the agency's position that it has exclusive jurisdiction over these markets.

The CFTC maintains that event contracts can serve legitimate financial purposes, including hedging and investment, while also providing information about expectations for future events.

From the agency's perspective, allowing Utah to enforce state gambling laws against federally registered exchanges could interfere with the national derivatives market.

Utah, meanwhile, argues that federal registration does not automatically shield conduct that violates state gambling laws.

The CFTC has also initiated legal proceedings against nine other states and submitted briefs in multiple appellate courts.

The dispute highlights a growing divide between federal financial regulation and state authority over gambling-related activities.

For Kalshi, the outcome could determine whether its federally regulated exchange can continue offering certain event contracts in states that prohibit gambling.

Why the Kalshi Criminal Charges Matter for Prediction Markets

The Utah case reflects a broader legal conflict affecting the rapidly expanding prediction market industry.

Platforms such as Kalshi allow customers to trade contracts tied to real-world outcomes, including sports competitions, elections, economic indicators, and other events.

Supporters describe these products as financial instruments that allow participants to express views about future outcomes.

State regulators, however, have questioned whether certain contracts function more like traditional gambling products, particularly when they involve sporting events.

That distinction matters because financial derivatives and gambling activities operate under different regulatory frameworks.

The Utah prosecution also introduces another dimension: potential criminal liability for executives.

By naming Mansour and Lopes Lara alongside KalshiEX, LLC, prosecutors have expanded the dispute beyond the company's regulatory status.

Utah is not the first state to pursue criminal charges against Kalshi. Arizona previously brought a criminal case involving the platform, although a federal judge subsequently blocked that prosecution.

The growing number of cases demonstrates how unsettled the legal treatment of prediction markets remains.

For exchanges, brokers, payment processors, marketing affiliates, and sports organizations, the litigation raises broader questions about the relationship between federal oversight and state enforcement authority.

The answers could shape how prediction markets operate across the United States.

Federal and State Courts Face an Unresolved Legal Question

At the center of the dispute is whether the Commodity Exchange Act prevents states from applying gambling restrictions to federally regulated prediction markets.

Kalshi and the CFTC argue that Congress gave federal regulators authority over derivatives exchanges, including markets offering qualifying event contracts.

Utah contends that its gambling laws remain enforceable against activities occurring within its borders.

The disagreement extends beyond Utah.

Courts in different jurisdictions have considered similar questions, and the developing litigation has produced conflicting outcomes.

The Tenth Circuit appeal, the CFTC's lawsuit against Utah, and the state's criminal proceedings may each influence how these issues are resolved.

The cases also raise questions about the limits of federal preemption, the definition of gambling, and the extent of state authority over financial products offered through online platforms.

Until higher courts provide clearer guidance, the regulatory treatment of sports-related prediction markets is likely to remain contested.

Cogent Law Perspective

Utah's criminal charges against Kalshi illustrate the increasingly complex relationship between financial innovation, sports-related event contracts, and government regulation.

The dispute involves overlapping areas of sports law, FinTech regulation, federal preemption, and litigation.

It also demonstrates how a company's federal regulatory status can become the subject of competing interpretations when its products intersect with longstanding state restrictions.

As the litigation develops, decisions from federal and state courts could have implications beyond Kalshi, potentially influencing how prediction market platforms and related businesses operate nationwide.

Cogent Law's Sports Law, FinTech, and Litigation teams monitor legal and regulatory developments affecting emerging financial markets, digital platforms, and sports-related commercial activities.

Key Takeaways

• Utah filed 14 criminal charges against Kalshi and named co-founders Tarek Mansour and Luana Lopes Lara as co-defendants. The allegations have not been proven in court.
• An undercover investigation forms the basis of the criminal case. Prosecutors allege that Kalshi facilitated 12 sports-related wagers in Utah and collected transaction fees.
• Utah has also filed a separate civil lawsuit seeking to restrict Kalshi's operations and recover allegedly unlawful proceeds.
• The CFTC sued Utah on October 27, 2026, arguing that federal law gives the agency exclusive jurisdiction over federally regulated derivatives exchanges.
• The broader jurisdictional dispute remains unresolved. Pending litigation could influence how prediction markets are regulated throughout the United States.

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