Utah files criminal charges against prediction market operator Kalshi and its co-founders

Authorities in the US state of Utah on Wednesday filed criminal charges against Kalshi, an operator of a prediction market where users trade on the outcomes of events, and two of its executives. The charges come months after a federal judge rejected the company's attempt to stop Utah from applying its strict anti-gambling laws to the activity.

The charging documents name the company and its co-founders: chief executive officer Tarek Mansour and chief operating officer Luana Lopes Lara. They include 13 counts of violating the state's gambling prohibition and one count of profiting from illegal activity. These are felonies, which carry the possibility of jail time. The attorney general's office did not immediately say what penalties it would seek.

Positions of the state and the company

Utah attorney general Derek Brown said Kalshi has kept operating in the state despite a federal court ruling that Utah's gambling laws apply to the company. He said gambling is illegal in Utah whether a person places the bet, runs the game or promotes it, that calling it a "prediction market" does not change its nature, and that federal registration does not put a company above the law.

Kalshi called the charges a "crazy overreach" and said Utah is "clearly playing politics". The company said it intends to fight the case in court, as it did in Arizona. Kalshi maintains that prediction markets fall exclusively under federal jurisdiction and are not subject to state gambling laws.

A wider dispute

Utah is among the states at the front line of a battle with the federal government over who regulates these markets. Litigation has spread across roughly 20 states, producing a fragmented legal landscape that analysts say will probably be resolved by the US supreme court. The criminal charges could represent a new tactic in how states try to assert regulatory authority over this fast-growing activity.