Utah files criminal charges against Kalshi and its founders

Former CFTC special adviser Peter Sanchez Guarda says states are increasingly turning to criminal prosecution against Kalshi. In his view, criminal cases are a route that operators find harder to move to federal court. Sanchez Guarda says the burden of proof is heavier in criminal cases.

Utah has filed charges with 14 counts each against Kalshi, as well as CEO Tarek Mansour and COO Luana Lopes Lara. The charges include an allegation of organized activity, classified as a second-degree felony. Prosecutors are using the executives' own statements about their control over the company in the case. Utah is the second state, after Arizona, to bring criminal charges against Kalshi. In May, the CFTC issued a preliminary federal injunction blocking a possible prosecution by Arizona.

The core legal question is whether the Commodity Exchange Act prevents states from applying their own gambling laws to certain event contracts. Kalshi argues that its products, which are regulated by the CFTC, fall under federal jurisdiction. States like Utah argue that registration does not exempt operators from local gambling restrictions.

Sanchez Guarda believes states have learned lessons from earlier court proceedings. However, as the report notes, there is no direct evidence that Kalshi's litigation strategy pushed Utah toward criminal action. What sets the Utah case apart from the others is that the company's founders are charged alongside it.

Utah's indictment is based on an undercover investigation. An investigator assigned to the State Attorney General's Office opened an account on Kalshi using a local address, phone number and bank card. According to the claim, the investigator made 12 trades between September 13 and 26 on NFL, college football, MLB, MLS and NHL events, spending about $115. According to the document, Eggerman confirmed that the IP address and location showed Utah before entering Kalshi. The platform also asked for location verification before the first $10 trade, which was placed on the Dallas Cowboys and New York Giants game. Prosecutors also cite the fees Kalshi collected on the trades as evidence that the exchange earned revenue from illegal gambling. The first trade carried a $0.44 fee, and the others had fees ranging from $0.03 to $0.78.