Utah has initiated 13 felony and one misdemeanor charge against Kalshi, accusing the prediction market platform of allowing an investigator to place sports bets in contravention of the state's stringent anti-gambling laws. This action marks Utah as the second state to file criminal charges against Kalshi; its felony allegations carry more severity compared to the 20 misdemeanor counts brought forth by Arizona earlier this year.
Kalshi has branded Utah's legal proceedings as "a crazy overreach," asserting confidence in its ability to prevail in court.
The charges are classified as second-degree and third-degree felonies. On Wednesday, the state escalated its efforts against the prediction markets industry by filing 14 criminal charges, which includes naming Kalshi's co-founders, CEO Tarek Mansour and COO Luana Lopes Lara, as co-defendants.
Utah ramped up its enforcement after several recent developments, including a civil lawsuit filed by Attorney General Derek Brown last week against Kalshi, its affiliated entities, and two trading firms associated with Susquehanna. Subsequently, on Monday, both the U.S. Department of Justice and the Commodity Futures Trading Commission (CFTC) filed suit against Brown in federal court, aiming to halt the state’s enforcement actions.
Now, Utah’s transition from civil to criminal charges heightens the stakes compared to the misdemeanor claims attempted by Arizona earlier this year.
The filing at the Third Judicial District Court in Salt Lake City accuses Kalshi of illegal gambling operations, outlining 14 specific counts, including:
– One second-degree felony for "pattern of unlawful activity."
– Twelve third-degree felonies for "online gambling promotion."
– One class A misdemeanor charge for "general gambling promotion."
According to Brown's office, an undercover investigator managed to create a gambling account with Kalshi using a local address and placed 12 sports wagers from September 13 to 26, totaling roughly $115. The bets were on various sports events, including NFL, college football (featuring Utah State games), MLB, and NHL games.
Should the second-degree felony charge be upheld, the maximum prison sentence could reach up to 15 years. Each of the third-degree felony charges of online gambling promotion carries a potential penalty of five years.
Gambling is explicitly illegal in Utah, and Brown maintains that Kalshi knowingly accepted bets from state residents. "We are unique in that there are only two states where the state constitution prohibits gambling outright," Brown stated during a recent appearance on the Deseret News podcast. "The law is very clear. Kalshi is breaking the law. They knew they were breaking it. They previously lost a lawsuit against Utah, yet they continue their operations here."
Utah is now seeking a preliminary injunction in state court to prevent Kalshi from offering event contracts related to sports, politics, and culture within the state. The state demands that Kalshi implements strict geofencing measures to ensure compliance.
This legal action follows Utah's civil lawsuit aimed at blocking Kalshi's activities in the state and recovering any proceeds deemed illegal. The developments come after the Tenth Circuit denied Kalshi's request for an injunction pending appeal related to a federal ruling that had previously favored Utah under the Commodity Exchange Act, asserting that it does not supersede state gambling laws.
Mansour and Lopes are specifically targeted in the lawsuit, with claims that they continue to facilitate online gambling in Utah despite the recent court rulings. The lawsuit contends that as co-founders, they maintained control of Kalshi while conducting activities in violation of state law. They have been summoned to respond to these criminal charges in court.
While Utah's approach marks a significant escalation, it is not the first state to pursue criminal action against Kalshi. Earlier in March, Arizona's Attorney General Kristin Mayes announced 20 misdemeanor charges following Kalshi's federal lawsuit against the state. Mayes claimed that Kalshi's operations constitute illegal gambling practices violating Arizona law.
Kalshi was temporarily able to prevent those charges, with a federal judge ruling that federal law preempts state enforcement actions against sports prediction markets, a position the CFTC supported.
Notably, Utah's charges are more severe, amounting to 13 felony counts, underscoring the state's strict anti-gambling stance compared to Arizona's misdemeanor charges.
In reaction to Utah's lawsuit, Kalshi's spokesperson reiterated that the move represents a political maneuver. "We look forward to addressing this in court, much like we did in Arizona," they stated.
Utah Attorney General Derek Brown emphasized the state's position further, stating, "Gambling is illegal in Utah, whether you place the bet, run the game, or promote it. Calling it a ‘prediction market’ doesn’t change the fact that it is illegal. Kalshi has continued to accept bets from Utahns, which is against the law, and we are putting a stop to it."
