Utah Attorney General Derek Brown filed criminal charges against prediction market Kalshi and its co-founders on Wednesday, accusing the platform of illegal gambling. This escalation follows a federal judge’s August ruling that Utah may enforce its anti-gambling laws against the company, as the state and federal government clash over regulatory jurisdiction.
Criminal Charges and Alleged Violations in Utah
Prosecutors have brought 13 felony charges against the platform, including one count of pattern of unlawful activity
and 12 counts of online gambling promotion. An additional charge involves profiting from illegal activity.
The state’s case centers on the assertion that Kalshi’s event contracts are effectively indistinguishable from traditional sports betting. According to the filings, an undercover law enforcement officer, Agent Scott Eggerman, began investigating the platform on September 13 by creating an account and successfully placing wagers on various sports games, including football and hockey contests, despite confirming his location in Utah. Attorney General Derek Brown stated that the company continued to operate in the state despite a prior federal court ruling confirming that Utah’s gambling laws apply to its activities. Brown emphasized that Utah has maintained a strict prohibition against gambling since achieving statehood in 1896.
Gambling is illegal in Utah, whether you place the bet, run the game, or promote it. Calling it a ‘prediction market’ doesn’t change what it is, and being federally registered doesn’t put a company above the law.
Derek Brown, Utah Attorney General
CFTC Sues Utah to Block Enforcement Actions
The criminal charges arrived just one day after the Commodity Futures Trading Commission (CFTC) sued the state of Utah in an effort to block its enforcement actions. The federal lawsuit contends that the Commodity Exchange Act-regulated transactions offered by Kalshi are not gambling.
While Kalshi has maintained that its operations fall exclusively under federal oversight, it has faced a string of legal setbacks in state-level courts. In August, a federal judge ruled that Utah is entitled to enforce its constitutional prohibition on gambling against the platform, noting that federal law does not supersede or limit the jurisdiction of states regarding their own gaming laws. Kalshi’s subsequent appeal to the U.S. Court of Appeals for the Tenth Circuit resulted in a denial of an emergency injunction on September 8, allowing the state to proceed with its regulatory efforts. The CFTC, however, claims there are numerous direct conflicts
between Utah law and federal regulations, which require designated contract markets to provide impartial services.
Utah Seeks Profits and Potential Jail Time
The state has formally requested that the court compel the defendants to surrender all profits derived from their operations within Utah. Though the attorney general’s office has not specified the exact jail time it will seek, the felony charges carry the potential for incarceration.
In a public response, Kalshi characterized the prosecution as a crazy overreach
and accused the state of playing politics.
The company stated it expects to resolve the matter in court, citing a previous legal victory in Arizona. Daniel Wallach, a lawyer specializing in sports wagering and gaming law who teaches at the University of Miami School of Law, suggested that Utah’s pursuit of felony charges marks a potential strategic shift for states that have previously relied on civil enforcement.
Broader Legal Landscape for Prediction Markets
The conflict in Utah is part of a wider, fragmented legal battle involving approximately 20 states. While the CFTC has argued that its regulatory authority should preempt state-level gambling bans, several federal courts have issued conflicting rulings. The CFTC has now initiated legal actions against roughly 10 states over their attempts to regulate or prohibit these markets.
Legal analysts suggest this divide among circuit courts makes it increasingly likely that the U.S. Supreme Court will eventually intervene to clarify whether state gambling laws can be applied to federally regulated prediction markets. New Jersey has already petitioned the Supreme Court to resolve the issue, supported by a coalition of 39 other states and the District of Columbia. Wallach noted that Utah’s criminal charges could serve as a bellwether
for how other states approach operators like Kalshi and Polymarket in the future.