Kalshi Utah Lawsuit: Founders Face Felony Charges as the CFTC Sues the State

This analysis sets out what the charges allege, how the federal lawsuit answers them and what counsel should watch.

What Utah has charged

The charging documents name Kalshi together with co-founders Tarek Mansour, the chief executive, and Luana Lopes Lara, the chief operating officer. As reported by the Deseret News and KSL, the case comprises 14 counts:

• one count of pattern of unlawful activity, a second degree felony;
• 12 counts of online gambling promotion, each a third degree felony; and
• one count of general gambling promotion, a class A misdemeanour.

KSL's account of the filing lists those counts against KalshiEX LLC, the exchange entity, and reports that the two executives are named as defendants without setting out their individual counts. The Associated Press, in its report on the charges, said the felonies carry possible jail time but that the Attorney General's Office did not say what penalties it would seek. Al Jazeera reported that it was filed in a Salt Lake City court.

In a statement quoted by the AP, Brown said gambling "is illegal in Utah, whether you place the bet, run the game, or promote it", and that calling a product a prediction market does not change what it is. Kalshi called the case "a crazy overreach" and said Utah was "clearly playing politics", adding that it expected to stop the case in court as it had in Arizona.

The undercover bets behind the counts

The 12 promotion counts track 12 wagers. According to the charging documents as described by the Deseret News, a state investigator, Scott Eggerman, opened an undercover Kalshi account on 13 September 2026 using an undercover name and a Visa debit card, with a Utah residence, a local phone number and a bank account on file. Over 11 days he placed a dozen bets on NFL and MLB games, the Utah against Utah State college football game and a Real Salt Lake soccer match.

One example in the papers was a $5 spread position that Utah would beat Utah State by 27.5 points. Utah won by 36 on 19 September and the investigator collected $4.13. The charges allege that Kalshi took fees of between 3 and 78 cents per transaction. KUER reported that the account was opened from a Utah IP address, after a federal court had already ruled that Utah's gambling laws apply to Kalshi.

How the Kalshi Utah lawsuit reached this point

The criminal case is the third front in a fight that began in February, when Kalshi sued Utah's governor and senior law officers in federal court to stop them enforcing state gambling law against it.

Date (2026)	Step
February	Kalshi sues Utah officials in the US District Court for the District of Utah, arguing federal law preempts state gambling law
17 March	Arizona becomes the first state to file criminal charges against Kalshi (20 counts)
4 August	Judge Robert J. Shelby grants Utah summary judgment: the Commodity Exchange Act does not preempt Utah's gambling laws
8 September	Tenth Circuit refuses Kalshi an injunction pending appeal
13 September	State investigator opens an undercover Kalshi account
20 October	Utah sues Kalshi entities and two Susquehanna firms in state court
26 October	United States and CFTC sue Utah and Brown in federal court
28 October	Utah files 14 criminal counts against Kalshi and its co-founders

What the federal court in Utah has already decided

Kalshi's own federal challenge failed. In a memorandum decision of 4 August 2026 in KalshiEX LLC v Cox, Judge Shelby held that the Commodity Exchange Act (CEA) does not preempt Utah's ability to enforce its anti-gambling laws, either expressly or by implication. He noted that the provision giving the CFTC "exclusive jurisdiction" over swaps on designated contract markets also says it does not limit the jurisdiction of state courts, and that the CEA's express preemption clause for gaming laws reaches only certain swaps traded off those markets and other listed products, not sports event contracts. Where a statute has more than one plausible reading, he added, courts accept the one that disfavours preemption. Utah won summary judgment and Kalshi's motion for a preliminary injunction was denied as moot.

Kalshi appealed. On 8 September a two-judge panel of the Tenth Circuit refused its emergency motion for an injunction pending appeal, finding that Kalshi had not shown the required factors weighed in its favour. The appeal itself continues, but for now nothing in federal law, as read by the courts in Utah, stops the state acting.

The state civil suit and the Susquehanna defendants

A week before the charges, Utah opened a civil front. On 20 October the Attorney General sued in the Third Judicial District Court for Salt Lake County, naming Kalshi, KalshiEX, Kalshi Klear, Kalshi Trading and two Susquehanna entities, Susquehanna International Group LLP and Susquehanna Government Products LLLP. The Deseret News reported that the 63-page complaint estimates Kalshi earned between $30.5 million and $61.1 million from Utah accounts, says more than 32,000 Utahns had verified Kalshi accounts as of February 2026, and alleges that Kalshi advertised itself as legal in all 50 states.

The state asks the court to stop Kalshi operating in Utah, to require a court-approved geolocation provider to block bets on sports, elections, politics, culture and "mentions", to order disgorgement of profits and to treat the activity as a public nuisance. Kalshi told the paper it is a federally regulated exchange on which customers trade with each other.

The inclusion of a trading firm alongside the exchange is the point for market participants. Utah's theory, as summarised in the CFTC's complaint, is that each entity "participates" in gambling: the exchange by arranging and making wagers available, the clearing entities by determining outcomes and issuing payouts, and Kalshi Trading and the Susquehanna firms, described as "market makers", by actively placing bets. Liquidity providers, clearing entities and brokers that route orders to event contracts should assume that state enforcement can reach beyond the exchange itself.

The CFTC's case against Utah

The federal government's response was filed on 26 October 2026 in the US District Court for the District of Utah as United States v Utah. The 33-page complaint argues that:

• event contracts are "swaps" under the CEA, and Kalshi has been a CFTC-designated contract market since November 2020;
• the CEA gives the CFTC "exclusive jurisdiction" over trading on regulated exchanges and so preempts state gambling law, expressly and by implication, under the Supremacy Clause;
• Utah's demands conflict directly with the CFTC's "impartial access" rule, which requires exchanges to offer access to all eligible participants nationwide; and
• allowing states to regulate event contracts would leave exchanges facing "50 regulators", defeating Congress's design.

The relief sought is broad. Beyond a declaration that Utah law is preempted as applied to CFTC-regulated exchanges, the United States asks for a preliminary and permanent injunction barring the state from enforcing its laws against, or investigating, CFTC-regulated entities and their affiliates and partners. Two days later the state filed criminal charges. KUER reported that the timing followed a months-long investigation and was coincidental.

According to the AP, the CFTC has now sued at least 10 states, Utah included,. KSL listed the others the federal government has sued as Arizona, Connecticut, Illinois, Kentucky, Minnesota, New Mexico, New York, Rhode Island and Wisconsin.

A split the Supreme Court may have to resolve

Utah's courts are not alone in siding with a state. As our analysis of prediction market legality set out, the Sixth Circuit held on 25 September that Kalshi's sports contracts are not swaps and that Ohio and Tennessee may apply their gambling laws, while the Third Circuit, in KalshiEX v Flaherty, found in Kalshi's favour against New Jersey. The AP reported that the Ninth Circuit has refused to let Kalshi resume sports and election trading in Nevada while that state's case proceeds, and Al Jazeera noted that New Jersey asked the US Supreme Court last month to decide whether state or federal authorities have jurisdiction.

Arizona shows how a criminal case can stall. Attorney General Kris Mayes filed 20 counts on 17 March, accusing Kalshi of accepting bets on political outcomes, college sport and individual player performance, according to an AP report at the time. CFTC chair Michael Selig called the dispute jurisdictional and "entirely inappropriate as a criminal prosecution". A federal judge later put the Arizona case on hold, though the AP reported this week that Arizona's authority to pursue it could be restored after the Ninth Circuit's Nevada decision. Utah's felony charges go further than Arizona's misdemeanour counts, and the AP quoted gaming lawyer Daniel Wallach as saying they may mark a shift from the civil actions states have mostly used.

What businesses and their advisers should watch

None of the charges has been tested and every defendant is presumed innocent. These are the open questions for clients.

• Personal exposure of executives. Utah has named the founders, not just the company. Boards should review indemnities, cover for defence costs and who signs off state-by-state product decisions. US criminal and white-collar lawyers are typically instructed early where individuals are named.
• Federal relief against a state prosecution. The CFTC asks for an injunction stopping Utah enforcing or investigating. Whether, and how quickly, a federal court will grant relief that would in practice halt a pending state criminal case is the next decision to watch.
• The Tenth Circuit appeal. A reversal of Judge Shelby's ruling would undercut both Utah proceedings.
• Counterparties and partners. Trading firms named as market makers in the civil suit show that liability theories can extend along the trading chain. Sports leagues, media partners and brokers should map their exposure with US regulatory advisers.
• Geolocation and onboarding controls. The state's evidence is an account with a declared Utah address that was allowed to trade. Firms that restrict by state should test whether their controls actually stop users who say where they are.

If your business faces a state investigation or needs advice on event contracts, use the form below and we will put you in touch with a member of our US directory or a US disputes lawyer.

Frequently asked questions

What is the Kalshi Utah lawsuit about?

It is a set of related cases over whether Utah can apply its gambling ban to Kalshi's event contracts. Kalshi lost its own federal challenge in August, Utah sued Kalshi in state court on 20 October, the CFTC sued Utah on 26 October and Utah filed criminal charges on 28 October.

Who has been charged in Utah?

Kalshi, with co-founders Tarek Mansour (chief executive) and Luana Lopes Lara (chief operating officer). The 14 counts are 13 felonies and one misdemeanour, all under Utah's gambling laws.

Why does the CFTC say Utah cannot regulate Kalshi?

The CFTC says event contracts on registered exchanges are swaps under the Commodity Exchange Act, over which it has exclusive jurisdiction, so state gambling law is preempted.

Has a court already ruled on Kalshi in Utah?

Yes. On 4 August 2026 Judge Robert J. Shelby held that the Commodity Exchange Act does not preempt Utah's gambling laws and granted the state summary judgment. The Tenth Circuit refused Kalshi an injunction pending appeal on 8 September; the appeal continues.

Is Utah the first state to bring criminal charges against Kalshi?

No. Arizona filed 20 misdemeanour counts on 17 March 2026, a case a federal judge later put on hold. Utah is the second state, and the first to bring felony charges.

Sources

1. Deseret News, 28 October 2026: deseret.com
2. KSL, 28 October 2026: ksl.com
3. Associated Press (via Santa Fe New Mexican), 28 October 2026: santafenewmexican.com
4. KUER, 28 October 2026: kuer.org
5. Al Jazeera, 29 October 2026: aljazeera.com
6. Complaint, United States and CFTC v State of Utah and Derek Brown, No. 2:26-cv-01055 (D. Utah, filed 26 October 2026): CourtListener
7. Memorandum Decision and Order, KalshiEX LLC v Cox, No. 2:26-cv-00151 (D. Utah, 4 August 2026): CourtListener
8. Order denying injunction pending appeal, KalshiEX LLC v Cox, No. 26-4100 (10th Cir., 8 September 2026): CourtListener
9. Deseret News, Utah civil complaint against Kalshi, 20 October 2026: deseret.com
10. Associated Press (via KTAR), Arizona criminal charges, 17 March 2026: ktar.com

About this article

Researched and written by The Corporate INTL Newsroom from court filings and contemporaneous reporting. It is general information, not legal advice, and describes allegations that have not been tested in court. Last reviewed 29 October 2026. For more analysis visit our newsroom or subscribe to our newsletter.