Utah’s case against Kalshi rests on a $5 bet. On September 13, an investigator for the state attorney general opened a Kalshi account under an undercover name and, over the next 11 days, placed a dozen wagers on NFL and MLB games, a Real Salt Lake match and the Utah–Utah State football game, the Deseret News reported. One was a $5 spread bet on Utah to win by more than 27.5 points. Utah won by 36, and the agent collected $4.13.
On October 28 those 12 bets became 14 criminal counts against Kalshi and its co-founders, Tarek Mansour and Luana Lopes Lara: one second-degree felony count of a pattern of unlawful activity, 12 third-degree felony counts of online gambling promotion and one misdemeanor count of gambling promotion, according to the Deseret News. The filing came a day after the Commodity Futures Trading Commission sued Utah to stop it from applying its gambling laws to prediction markets, The Block reported.
The tiny stakes can make the case look petty. I think they are the whole argument. Utah is not trying to prove Kalshi did something exotic. It is trying to show that a “contract” on a college football spread is a sports bet with a different label, and two federal appeals courts have now said roughly the same thing. Putting the founders’ names on felony charges is how a state turns a slow legal dispute into a question executives have to answer personally.
A split the courts haven’t settled
Kalshi’s core claim is that it is a federally regulated exchange, so its event contracts fall under the CFTC’s exclusive jurisdiction and state gambling law does not apply. Federal courts are divided. In April, a 2–1 Third Circuit panel sided with Kalshi against New Jersey, holding that sports event contracts on a registered exchange are swaps and that federal law preempts the state’s gambling rules, Skadden noted.
The Ninth Circuit went the other way in Nevada’s case in August, and on September 25 a unanimous Sixth Circuit panel ruled against Kalshi in Ohio and Tennessee, finding that sports contracts are not swaps and that, even if they were, federal law would not override state gambling laws, Blank Rome wrote. A Fourth Circuit case from Maryland is still pending.
Utah is not starting from scratch either. Kalshi sued the state in federal court in February, and in August U.S. District Judge Robert Shelby ruled that Utah’s anti-gambling laws apply to its sports contracts and are not preempted, the Deseret News reported. The state says Kalshi kept taking bets afterward. Its separate civil complaint, filed October 20, estimates Kalshi made $30.5 million to $61.1 million from Utah accounts between February and mid-October.
The Block posted the news shortly after the charges were filed:
THE BLOCK: Utah AG Derek Brown has filed criminal charges against Kalshi and executives Tarek Mansour and Luana Lopes Lara for allegedly promoting illegal online gambling.
The move follows a lawsuit Brown filed a week earlier over bets on sports, elections, and politics, and… pic.twitter.com/m2kVhkzqj4
— The Block (@TheBlockCo) October 29, 2026
Why criminal charges change the math
The business at stake is big. Kalshi recorded $15.27 billion in contract volume in one September week, its best week of the year, and its first $3 billion day, DeFi Rate reported. A company that size can absorb civil injunctions state by state while it waits for the Supreme Court.
Felony exposure for named executives is different. It does not go away because the company wins in another circuit, and it lands on people rather than on a balance sheet. My read is that Utah is less interested in winning a $5 gambling case than in making the cost of waiting for a final answer visible to the people running the company.
The case for Kalshi
Kalshi’s argument is not frivolous, and the federal government is on its side. The CFTC’s lawsuit says it has exclusive jurisdiction over futures, options and swaps and that federal law preempts state gambling law as applied to event contracts. CFTC Chair Michael Selig said Congress made the agency the regulator with “sole responsibility” over these markets, and the agency has sued at least 10 states, The Block reported. On September 28 it also proposed a rule that would define event contracts as swaps, according to Blank Rome.
There is also a fairness point. Prosecuting founders for running a market that a federal regulator is actively defending in court puts them between two governments that disagree. Kalshi called the charges “a crazy overreach” and said Utah is “clearly playing politics,” adding that the company “answers to federal law, and no single state should have a veto over it,” the Deseret News reported. It has beaten a criminal case before: Arizona filed charges in March, and a federal judge blocked that prosecution while the state appeals.
Utah’s answer is simpler. “Gambling is illegal in Utah,” Attorney General Derek Brown said, whether a person places the bet, runs the game or promotes it, per The Block. The states’ side, as the Sixth Circuit framed it, is that gambling has long been regulated by states and that geofencing makes it possible for a national exchange to comply with both federal rules and state law, Blank Rome noted.
What I’ll be watching
The real decision belongs to the Supreme Court. New Jersey has asked the justices to resolve the split, PYMNTS reported, and Crypto.com and Robinhood have filed petitions from the Ninth Circuit ruling, Withers noted.
Until then, the thing I’d watch is whether Kalshi can get a federal court to stop Utah the way it stopped Arizona. That looks harder here, because a federal judge in Utah has already ruled that the state’s gambling laws apply. If Utah’s prosecution goes forward, other states with the same view will have a template, and I’d expect the question of whether a $5 college football spread is a swap or a bet to reach the Supreme Court faster.
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