Utah prosecutors on Wednesday, October 28, filed 14 criminal counts against the prediction market Kalshi. Its two co-founders, CEO Tarek Mansour and COO Luana Lopes Lara, are charged too. Thirteen counts are felonies. The case rests on 12 sports trades, worth $114.87 in total, made by an undercover state agent.

The Kalshi Utah charges arrived two days after the federal government sued Utah to stop it from enforcing its gambling laws against the company. A state is now prosecuting the founders of a federally registered exchange. Washington argues the state has no power over that exchange at all.

The charges are allegations, and no court has ruled on them. Kalshi called them “a crazy overreach” and said Attorney General Derek Brown was “playing politics.” The company made those comments to the Deseret News, as cited by Reason.

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A dozen trades from an undercover account

The Salt Lake Tribune read the charging documents, which the attorney general’s office posted on its website. An agent opened an undercover Kalshi account using a Utah home address, a local phone number and a locally issued debit card. Before he could trade, Kalshi asked him to confirm his location in Utah through location services, the documents say.

Agent Scott Eggerman began the investigation on September 13, KSL reported. Over about two weeks he made 12 trades on NFL, MLB, college football, MLS and NHL games, according to the Tribune. He went six-for-12 and finished down $25.10.

Several of the games had a local angle. He traded on the Utah Utes against the Utah State Aggies and on a Real Salt Lake match. Another trade backed the Utah Mammoth against the Colorado Avalanche on September 26. One trade, on Troy upsetting Utah State, lost $20, Reason reported.

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Each trade became its own count. Kalshi faces 12 counts of online gambling promotion, each a third-degree felony, the Tribune reported. Prosecutors added one count of pattern of unlawful activity, a second-degree felony, and one class A misdemeanor of general gambling promotion.

The state did not seek arrest warrants, the Tribune reported. Instead, Mansour and Lopes Lara received summonses to answer the charges in Third District Court in Salt Lake County.

Why naming the founders raises the stakes

Utah is the second state to bring criminal charges against Kalshi. Arizona was first, in March. In that case, Kalshi’s executives were not named as defendants in the charging documents, the Associated Press reported at the time.

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Utah went further by charging the two people who run the company. The charges say the company and both founders kept offering gambling in Utah after the state’s court wins. According to KSL, they allege the three “have continued to provide or offer to provide online gambling” there.

Brown framed the case as enforcement of a ruling Kalshi already lost. “A federal court has already ruled that Utah’s gambling laws apply to Kalshi,” he told the Deseret News, as quoted by Reason. “Kalshi kept taking bets from Utahns anyway.”

That ruling came in a case Kalshi started. The company sued Utah in federal court in February, after lawmakers added proposition bets to the state’s definition of gambling, KUER reported.

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On August 4, U.S. District Judge Robert Shelby ruled for Utah. He found that the federal law Kalshi relied on does not preempt the state’s gambling statutes, according to the Deseret News.

Kalshi appealed to the 10th Circuit and asked it to pause Shelby’s ruling. That request was denied on September 8, KUER reported, so the ruling stays in force while the appeal continues. The undercover agent’s first trade came five days later.

The civil suit that came first

Eight days before the charges, on October 20, Brown filed a 63-page civil complaint in state court in Salt Lake City. That suit names several Kalshi entities and two trading firms in the Susquehanna group.

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The civil case shows the scale of the dispute. Utah estimates Kalshi collected between $30,591,600 and $61,183,200 in fees from trades by Utah accounts, KUER reported. More than 32,000 Utahns had verified Kalshi accounts as of February, the complaint says. It puts Utah bettors’ losses at no less than $5.5 million, according to the Deseret News.

Set against those divs, the criminal case is small. The agent risked $114.87 and lost $25.10. What the charges add is personal exposure for the founders, which a civil fine against the company does not carry.

Utah is one of two states that ban all forms of gambling, the Deseret News noted.

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Gov. Spencer Cox said in March, after Arizona filed its case, that he wanted Utah to follow suit. “It’s, you know, walks like a duck and quacks like a duck. It’s a duck,” he told reporters, KUER reported.

What the federal lawsuit asks a judge to do

The United States and the Commodity Futures Trading Commission sued Utah and Brown in federal court in Utah. The complaint, case 2:26-cv-01055, is stamped as filed on October 26. The CFTC announced it the next day.

We read the 33-page filing. Its core claim is that Kalshi’s event contracts are “swaps” under the Commodity Exchange Act. Congress gave the CFTC “exclusive jurisdiction” over swaps, it argues. In its words, “CEA-regulated transactions are not gambling.”

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The complaint also cites a specific federal rule. CFTC regulations require exchanges like Kalshi to give “impartial access” to eligible traders nationwide. Blocking Utah residents would force Kalshi to break that rule, the complaint says.

The relief it seeks is broad. The government wants a preliminary and permanent injunction against Utah officials. It would bar them “from investigating CFTC-regulated entities and their affiliates and partners for violations of, or enforcing,” state law on those trades.

The complaint was filed before the charges and does not mention them. But as written, that request would cover the kind of undercover work the criminal case is built on.

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CFTC Chairman Michael Selig said Congress made his agency “the federal regulator with sole responsibility to oversee these markets.” The CFTC has taken nine other states to court, the complaint says, including Arizona, New York and Wisconsin. Selig had already objected to Arizona’s charges in March. He wrote on X that it was “a jurisdictional dispute and entirely inappropriate as a criminal prosecution,” the AP reported.

How the fight over who regulates could end

Federal courts in Utah now hold two cases pointing in opposite directions. Shelby has already ruled that Utah’s laws apply to Kalshi, and the 10th Circuit is reviewing that decision. The new federal case asks a court in the same district to declare those laws preempted.

The national picture is just as divided. Kalshi faces more than 20 lawsuits and cease-and-desist actions across the country, Reason reported, citing the National Conference of State Legislatures. Federal appeals courts have split on whether states can apply gambling laws to sports contracts. We explained that split in our look at the NBA’s Kalshi and Polymarket deals.

That split could send the issue to the Supreme Court. This month the NFL, 39 states and Washington, D.C., filed amicus briefs on the question, according to Reason. They argued that conflicting 6th and 9th Circuit rulings leave unclear who regulates these markets.

The stakes reach beyond sports, since prediction markets also list election contracts, such as markets on Israel’s next government.

For Kalshi’s founders, the next step is local. They must answer the summonses in Third District Court. Meanwhile, the CFTC is asking a federal judge for an injunction that would stop Utah’s enforcement altogether.