In a recent discussion with Nick Gillespie of Reason, Kalshi’s chief executive Tarek Mansour suggested there exists a sizable bipartisan bloc of lawmakers who are genuinely in favor of prediction-market platforms. Utah’s attorney general, Derek Brown, is not part of that group.
On Wednesday, Brown filed state criminal charges against Kalshi, along with Mansour and fellow co-founder and chief operating officer Luana Lopes Lara. The allegations include one count of general gambling promotion, a class A misdemeanor; one count of a pattern of unlawful activity, a second-degree felony; and twelve counts of online gambling promotion, a third-degree felony.
The clash between Kalshi and Utah has been unfolding for some time. In August, U.S. District Court Judge Robert J. Shelby ruled that federal law does not stop Utah from enforcing its anti-gambling statutes against Kalshi, effectively barring the platform from operating in the Beehive State. A civil lawsuit filed by Utah last week accused the prediction market of maintaining a “brazen pattern of unlawful conduct.” The criminal case follows a day after the U.S. Commodity Futures Trading Commission (CFTC) filed its own suit to prevent Utah from enforcing its anti-gaming laws against Kalshi.
Despite the prohibition on Kalshi in Utah since August, Special Agent Scott Eggerman of the Attorney General’s Office managed to create an undercover Kalshi account under a fictitious name and with a discreet Visa Debit Card, according to the Wednesday complaint.
Eggerman’s personal information on the account identified him as a Utah resident, complete with a local phone number and a bank account at a Utah-based financial institution. Over roughly two weeks, he placed twelve wagers totaling $114.87 across the NFL, MLB, a local college football contest, and a Major League Soccer match featuring Real Salt Lake. In one instance, he lost $20 on a bet that the Troy Trojans would upset the Utah State Aggies.
Utah contends that Eggerman should never have been able to establish an account, let alone place bets on the platform. When Kalshi challenged Shelby’s ruling, it sought an injunction from the U.S. Court of Appeals for the 10th Circuit to pause the order during the appeal. However, in September the 10th Circuit denied Kalshi’s injunction request, leaving Shelby’s order in place while the case was considered.
“A federal court has already determined that Utah’s gambling laws apply to Kalshi,” Brown told the Deseret News. “Kalshi continued to accept bets from Utah residents anyway. That is illegal, and we are stopping it.”
Utah is joined by Arizona as the only two states pursuing criminal charges against Kalshi. Yet the platform faces more than 20 lawsuits and cease-and-desist actions nationwide, according to the National Conference of State Legislatures. The matter could soon reach the Supreme Court. Earlier this month, the NFL, 39 states, and Washington, D.C., filed amicus briefs arguing that conflicting rulings in the Sixth and Ninth Circuits leave uncertainty over whether state authorities or the CFTC should regulate prediction markets.
Kalshi has ties to Reason Foundation, the nonprofit organization behind Reason. In a statement to the Deseret News, a Kalshi spokesperson called the criminal charges a “crazy overreach” and accused Brown of engaging in political maneuvering. With Shelby’s ruling still in effect, Kalshi’s continued operation in Utah would violate state law as long as the state regards Kalshi as a gambling platform. Nonetheless, the charges appear designed to pressure Kalshi into conceding to the state’s demands rather than allowing the ongoing legal proceedings to unfold.
Utah acknowledges a noticeable surge in Kalshi activity from residents within the state. Nevertheless, the attorney general’s office appears determined to restrict adults in Utah from spending their money as they see fit.
