Kalshi Founders Face Felony Charges as Utah Escalates Its Gambling Fight

Utah has filed felony charges against Kalshi co-founders Tarek Mansour and Luana Lopes Lara. The Oct. 28 prosecution also names the exchange operator, KalshiEX LLC.

The case centers on 12 sports wagers allegedly placed by an undercover investigator in Utah. It brings potential prison time for the executives into the fight over state gambling laws and federal prediction-market oversight.

Prosecution Includes 13 Felony Counts and One Misdemeanor

Attorney General Derek Brown’s office brought one second-degree felony count of a pattern of unlawful activity, 12 third-degree felony counts of online gambling promotion and one class A misdemeanor count of general gambling promotion.

Mansour is Kalshi’s chief executive, while Lopes Lara is its chief operating officer. The executives were issued summonses to appear in court. Kalshi called the prosecution a “crazy overreach” and said it would challenge the case in court.

Arizona brought criminal charges against Kalshi in March. A federal court blocked that prosecution with a preliminary injunction in May, and the state is appealing the injunction.

Undercover Investigator Allegedly Bet After Confirming Utah Location

Prosecutors say investigator Scott Eggerman opened an undercover account on Sept. 13 using details identifying him as a Utah resident. Those included a Utah address, phone number and bank account. Eggerman allegedly placed 12 sports wagers while in Salt Lake and Davis counties during September, repeatedly confirming his Utah location through the platform’s location services.

The transactions included game outcomes, point spreads and individual players’ performances. Prosecutors allege Kalshi charged fees on those trades and used the proceeds to operate its business.

The allegations against the executives draw on public statements about their control over Kalshi’s strategy and operations. Prosecutors contend both participated in running the business through a pattern of unlawful activity.

Utah’s Civil Case Seeks Trading Restrictions and Profits

The prosecution follows Utah’s civil lawsuit against Kalshi and Susquehanna firms, filed on Oct. 20. That case seeks restrictions on contracts covering sports, elections, politics and other outcomes, along with the repayment of allegedly unlawful profits.

The state also wants court-approved third-party location checks to enforce the requested restrictions. Its civil claims reach beyond Kalshi to trading firms accused of taking the opposite side of customers’ positions.

Kalshi had earlier sued to prevent state enforcement. In August, a federal judge rejected its argument that the Commodity Exchange Act displaced Utah’s gambling laws. The Tenth Circuit subsequently declined to block enforcement while Kalshi appealed.

Brown has maintained that federal registration does not exempt the platform from Utah’s gambling ban. Kalshi argues that its event contracts fall under federal financial regulation.

CFTC Sues to Keep Prediction Markets Under Federal Oversight

On Oct. 27, the Commodity Futures Trading Commission (CFTC) announced a separate federal lawsuit seeking to block Utah’s enforcement against registered contract markets. The agency argues that federal law gives it exclusive authority over those markets and overrides the state’s attempted restrictions.

That places the federal regulator directly at odds with Utah’s position. The CFTC’s action challenges the state’s enforcement powers, while the criminal prosecution seeks to hold Kalshi and its founders responsible for alleged gambling offenses. CFTC Chairman Michael Selig stated:

“[…] Congress entrusted the CFTC to be the federal regulator with sole responsibility to oversee these markets.” 

The agency has also initiated legal proceedings against nine other states. It has submitted briefs in four federal appeals courts and one state supreme court as part of its effort to defend federal oversight.