Utah Hits Kalshi With 13 Felony Counts as CFTC Seeks Emergency Relief
Key Points
- Utah prosecutors filed 13 felony counts and one misdemeanor against Kalshi and its co-founders, escalating the state's fight over prediction markets.
- The CFTC filed an emergency motion to block Utah's criminal and civil enforcement actions, with a federal court conference scheduled for November 6.
- DraftKings, FanDuel and PrizePicks have restricted event contracts in Utah, while Fanatics plans to stop accepting trades on November 4.
- A bipartisan coalition of 37 attorneys general has backed Utah's regulatory authority in a separate federal appeal.
Kalshi's Utah Criminal Case Escalates Into a Federal Injunction Fight
Utah prosecutors filed a 14-count criminal case against Kalshi and its co-founders, Tarek Mansour and Luana Lopes Lara, on October 28, alleging that the federally regulated exchange illegally promoted online gambling to state residents. The charges include 13 felonies and one misdemeanor, with prosecutors relying on an undercover investigation involving 12 sports transactions.
The prosecution followed an October 20 civil lawsuit in which Utah sought to stop Kalshi from offering prohibited event contracts and recover alleged unlawful proceeds. The United States and Commodity Futures Trading Commission (CFTC) responded with a federal lawsuit on October 26, arguing that Utah's enforcement efforts violate the federal government's exclusive authority over derivatives exchanges.
The dispute escalated further on October 29 when federal regulators requested a temporary restraining order and preliminary injunction covering Utah's civil and criminal enforcement actions. U.S. District Judge Robert Shelby scheduled a November 6 conference on the request, leaving the federal motion unresolved as of November 2.
Utah's 14 Criminal Counts Stem From 12 Undercover Sports Trades
According to Utah's October 28 charging document, an investigator from the Attorney General's Office opened a Kalshi account using a Utah residential address, phone number and banking information. After confirming his location through the platform, the investigator placed 12 sports trades totaling $114.87 during September.
The transactions included NFL games, college football, baseball, soccer and hockey. Prosecutors assigned one third-degree felony count of online gambling promotion to each transaction, added a second-degree felony count alleging a pattern of unlawful activity, and filed a misdemeanor count for general gambling promotion.
The state alleges that Kalshi facilitated the transactions and collected fees despite knowing that the customer was physically located in Utah, where the state constitution prohibits gambling. Attorney General Derek Brown defended the prosecution in a statement to FOX 13 News, saying, "Gambling is illegal in Utah, whether you place the bet, run the game, or promote it."
Kalshi rejected the allegations. "This is a crazy overreach; Utah is clearly playing politics," a company spokesperson said in a statement to FOX 13 News, adding that the exchange intends to challenge the prosecution in court. Mansour and Lopes Lara were issued summonses rather than arrest warrants, and the allegations have not resulted in criminal convictions.
The CFTC Wants to Block Utah's Prosecution, but Faces a Familiar Judge
The CFTC's federal complaint against Utah argues that contracts offered through federally registered designated contract markets fall under the Commodity Exchange Act. Federal regulators contend that Utah cannot use state gambling laws to prevent those exchanges from offering contracts that fall within the CFTC's jurisdiction.
In the agency's October 27 announcement, Chairman Michael S. Selig said Congress had entrusted the CFTC with "sole responsibility to oversee these markets." The subsequent emergency motion seeks protection extending beyond Kalshi, potentially preventing Utah from pursuing comparable enforcement actions against other federally regulated exchanges, intermediaries and their officers.
The federal government's challenge faces a complication: Judge Shelby previously ruled against Kalshi on the central jurisdictional question. In August, he granted summary judgment to Utah, concluding that federal commodities law did not preempt enforcement of the state's gambling restrictions. Kalshi appealed, but the Tenth Circuit denied its request for interim protection in September.
Utah has also received substantial support from other state governments. A bipartisan coalition of 37 attorneys general filed an amicus brief in Kalshi's pending Tenth Circuit appeal, according to an October 29 announcement from the California Department of Justice. The coalition argues that federal commodities registration should not displace states' longstanding authority to regulate gambling and protect consumers.
DraftKings, FanDuel, Fanatics and PrizePicks Restrict Utah Trading
Major operators began restricting their Utah prediction products as the legal confrontation intensified. DraftKings Predictions confirmed to Legal Sports Report that sports, political, novelty and certain other event contracts were no longer available to customers physically located in Utah. FanDuel Predicts implemented comparable restrictions on October 30.
Both platforms retained access to financial event contracts, including markets tied to economic and financial indicators. The companies also indicated that existing positions in the affected markets would remain open and settle normally, limiting the immediate disruption for customers with outstanding trades.
Other operators took additional measures. Fanatics confirmed to SBC Americas that Fanatics Markets would stop accepting trade placements in Utah beginning November 4, while PrizePicks disabled its sports-focused Team Picks and non-sports Culture Picks offerings. PrizePicks' current eligibility guidance continues to list its daily fantasy sports (DFS) Player Picks product as available in Utah.
These restrictions followed the criminal charges and broader enforcement campaign rather than a new court order requiring all affected platforms to withdraw. The decisions nevertheless show how quickly regulatory exposure can influence commercial operations before the underlying jurisdictional dispute reaches a final resolution.
Why This Matters
For Utah customers, the immediate consequence is fewer markets to trade. DraftKings and FanDuel have restricted sports and other event contracts while keeping financial markets available. Customers with existing positions should check their platform's settlement rules, although both companies have said affected trades will settle normally.
The bigger issue is how much protection federal regulation actually gives these platforms. Kalshi argues that CFTC oversight allows it to offer event contracts nationwide, while Utah maintains that its gambling laws still apply. A federal judge has already sided with Utah in Kalshi's earlier civil case, and the CFTC is now asking that same judge to intervene. The jurisdictional question remains unsettled.
The criminal charges make that uncertainty considerably more expensive for operators to ignore. Civil enforcement can result in fines or restrictions on a company's business. Criminal proceedings can expose executives to personal liability. With Kalshi's co-founders now facing felony charges, competing platforms have a compelling reason to reconsider how much legal risk they are willing to accept.
DraftKings and FanDuel also have licensed sportsbook businesses and established relationships with state regulators. Fighting Utah over prediction markets could create unnecessary friction with regulators elsewhere, particularly when restricting a handful of contracts offers a relatively straightforward way to reduce exposure.
For bettors nationwide, the concern is whether Utah's approach spreads. More states pursuing criminal enforcement could leave customers with increasingly different market selections depending on where they live, potentially reducing competition and liquidity. Those effects are not yet measurable, but the operator withdrawals show that platforms are already limiting access before the courts have reached a final answer.
What Happens Next
The immediate focus is the November 6 federal court conference, where Judge Shelby will address the CFTC's emergency motion and the underlying lawsuit. The government wants Utah's pending enforcement proceedings stopped, but the court has not granted that relief. Fanatics' announced November 4 trading cutoff will provide another near-term indication of how operators are responding.
Kalshi's appeal of the earlier federal ruling remains pending before the Tenth Circuit, while Utah's civil and criminal proceedings continue unless stayed or otherwise resolved. Further court orders, along with any additional operator restrictions, will determine whether Utah's enforcement approach gains traction beyond the state.
Marcus has spent over 20 years navigating the legal side of online betting - from his early days consulting for offshore operators to helping licensed U.S. sportsbooks launch in regulated markets. He’s worked with compliance teams, reviewed licensing frameworks in 15+ states, and advised on some of the biggest regulatory shifts since PASPA was repealed.
At BettingScanner, Marcus serves as the voice of reason - translating legalese into plain English and helping bettors understand what’s legal, what’s risky, and where the gray areas live. If you’re ever unsure about the rules, Marcus is your man - as he probably helped write them.
