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Utah has filed felony charges against Kalshi and its co-founders, alleging violations of the state’s gambling laws. The charges come amid separate court battles over whether federal commodities law prevents states from regulating sports-related event contracts.
Utah has filed felony charges against Kalshi and its co-founders for allegedly violating the state’s gambling laws, adding a criminal case to a broader legal dispute over whether states can restrict prediction-market contracts tied to sports and other events. The charges are reported in an update to Ars Technica’s October 28 story; the supplied report does not identify the specific counts or provide a response from Kalshi.
The charges follow a series of rulings in Utah’s dispute with Kalshi, an exchange that offers event contracts. In August, U.S. District Judge Robert Shelby granted Utah’s motion for summary judgment and denied Kalshi’s request for a preliminary injunction. That ruling rejected Kalshi’s argument that federal law prevents Utah from enforcing its gambling restrictions against the company.
Shelby wrote that the federal law cited by Kalshi does not preempt Utah’s ability to enforce anti-gambling laws. He pointed to provisions of the Commodity Exchange Act (CEA) that, in his reading, preserve state jurisdiction and do not broadly bar states from regulating gambling. Kalshi is appealing the decision to the U.S. Court of Appeals for the Tenth Circuit.
The Tenth Circuit denied Kalshi’s emergency request for an injunction pending appeal on September 8, leaving the state’s restrictions enforceable while the appeal proceeds. Utah later filed a lawsuit seeking to shut down Kalshi in the state, according to Ars Technica. The newly reported felony charges add a separate criminal-law dimension; the source material does not establish how they relate procedurally to that civil lawsuit.
Criminal Charges Add to Kalshi’s Utah Fight
The charges raise the stakes for Kalshi and its co-founders beyond the question of whether the company can continue operating in Utah. A criminal case can carry consequences distinct from an injunction or civil lawsuit, although the available report does not specify potential penalties, the alleged conduct underlying each count, or the next court dates.
The case also matters to the wider prediction-market industry. Courts have reached different conclusions about whether states may apply gambling laws to federally regulated exchanges offering sports-related or other event contracts. The Utah case is part of a broader legal conflict over the boundary between federal commodities oversight and state gambling regulation. Its outcome could affect other operators and the states seeking to restrict their products.
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The dispute is playing out as Kalshi appeals its loss in Utah. In his August ruling, Shelby cited the CEA’s language that federal commodities jurisdiction does not “supersede or limit” jurisdiction held by federal or state courts. He also said the statute provides for state regulation of gaming laws except in specified cases. Those are the judge’s conclusions in the Utah litigation, not a final nationwide ruling on every type of event contract.
Other courts have taken differing approaches. The Third Circuit ruled that New Jersey could not regulate sports bets offered on prediction markets, while Kalshi lost similar cases in the Sixth and Ninth Circuits in disputes involving Ohio, Tennessee and Nevada. The CFTC has also sued Utah, making arguments similar to those Kalshi advanced, Ars Technica reported. The agency’s complaint says other federal courts have blocked states from enforcing gambling laws against CFTC-regulated exchanges.
New Jersey has asked the U.S. Supreme Court to resolve the disagreement among appellate courts. Thirty-nine other states and the District of Columbia filed a brief supporting that request, according to the report. The Supreme Court’s involvement is not guaranteed, but the division among circuit courts creates the possibility of a nationwide decision.
““Utah is not the first State that has attempted to invade the Commission’s exclusive jurisdiction over swaps.””
— Commodity Futures Trading Commission lawsuit against Utah, as quoted by Ars Technica
Details of the Charges Remain Sparse
The report confirms that felony charges were filed, but the supplied source material does not list the charge counts, filing date, alleged transactions, or which specific acts prosecutors attribute to Kalshi or each co-founder. It also does not include a statement from the company or its founders, or identify the prosecutor handling the case.
It is not clear whether the criminal proceedings will be coordinated with Utah’s civil effort to stop Kalshi from operating in the state. The ultimate reach of federal law remains unsettled as well: the Utah ruling is under appeal, other courts have disagreed, and the Supreme Court has not yet been reported to have accepted New Jersey’s petition.
Appeal and Criminal Case Proceed
Kalshi’s appeal is pending before the U.S. Court of Appeals for the Tenth Circuit; the emergency request to pause enforcement has already been denied. The criminal case will proceed on a separate track, but the supplied report gives no schedule for an initial court appearance or other next step.
Further developments may include filings that clarify the charges and Kalshi’s response, as well as decisions in the pending appeals and the Supreme Court petition. Until those details emerge, the charges should be treated as allegations, and the broader question of how state gambling laws apply to prediction markets remains unresolved.
Key Questions
What charges does Kalshi face in Utah?
The available report says Utah filed felony charges against Kalshi and its co-founders for alleged violations of state gambling laws. It does not specify the counts or describe the conduct alleged.
Has a court found Kalshi guilty?
The source reports that charges have been filed, not that Kalshi or its co-founders have been convicted. The allegations have not been established as facts in a criminal judgment.
Can Kalshi continue operating in Utah during its appeal?
The Tenth Circuit denied Kalshi’s emergency request for an injunction on September 8. That left Utah’s restrictions enforceable while the appeal proceeds, according to the report.
Why are courts disagreeing about prediction markets?
The dispute centers on whether the Commodity Exchange Act’s federal framework limits states’ power to enforce gambling laws against exchanges offering event contracts. Federal courts have reached different conclusions in cases involving several states.
Could the Supreme Court decide the broader issue?
New Jersey has petitioned the Supreme Court to resolve the split among appellate courts, with 39 states and the District of Columbia supporting its request. The source does not report that the court has agreed to hear the case.
Source: arstechnica.com
