Utah has become a major battleground in the prediction-market fight after the state filed felony charges against Kalshi and its two cofounders, Tarek Mansour and Luana Lopes Lara.

Three separate filings were made Wednesday in state court by Utah Attorney General Derek Brown, one against Kalshi, one against Mansour, and one against Lara. The filings include 14 counts against each, including a second-degree penalty for a “pattern of unlawful activity” that alone could result in 15-year prison sentences. In total, if Mansour and Lara are convicted, they could each face as many as 75 years in prison.

“Gambling is illegal in Utah, whether you place the bet, run the game, or promote it,” Brown said in a statement. “Calling it a ‘prediction market’ doesn’t change what it is, and being federally registered doesn’t put a company above the law. A federal court has already ruled that Utah’s gambling laws apply to Kalshi. Kalshi kept taking bets from Utahns anyway. That is illegal, and we’re putting a stop to it.”

The charges stem from an undercover investigation that saw special agent Scott Eggerman make a Kalshi account and place 12 bets on sporting events, including an NFL game between the Cowboys and Giants and an NHL game between the Mammoth and Avalanche. In total, he bet $114.87 and lost $25.10.

“This is a crazy overreach,” a Kalshi spokesperson said in a statement. “Utah is clearly playing politics. We look forward to putting a stop to this in court, just like we did in Arizona.”

The company is referring to misdemeanor charges brought by Arizona against Kalshi in March. In May, a federal judge ruled Arizona’s attorney general could not prosecute Kalshi.

Wednesday’s filings came the day before Kalshi, on Thursday, announced it has closed a new $1 billion funding round that values the business at $40 billion. 

The criminal charges mark a significant escalation of the fight over prediction markets in Utah. Kalshi sued the state in February to try to stop it from enforcing its gambling laws, but a September ruling in that case said the company cannot stop Utah regulators from seeking to enforce state gambling laws. 

Less than two weeks ago, Utah sued Kalshi and market maker Susquehanna in federal court to “halt their illegal conduct” in the state and “pull back” profits the state claims were illegally obtained. In that case, Utah on Thursday asked the court to issue an order prohibiting Kalshi from offering markets on sports and elections and requiring the company to implement geofencing to ensure users cannot place trades while in the state. 

‘Shameful’ Tactics

The Commodity Futures Trading Commission has also gotten involved; earlier this week, it sued Utah and AG Brown, saying the state is trying to “intrude on the exclusive federal scheme Congress designed to oversee United States commodity derivatives markets.” Since April 2, the CFTC has now sued 10 states to try to protect prediction markets from state regulation, including Kentucky, New Mexico, and Minnesota.

In response to Wednesday’s criminal charges brought against Kalshi and its cofounders, a CFTC spokesperson told Front Office Sports that Utah’s AG “has resorted to shameful, intimidation-style tactics in an effort to bully CFTC-registered exchanges.”

“These actions are beneath the standards of the court and should be regarded as such,” they added. “The agency will not waver in its commitment to vigorously defend our exclusive jurisdiction over these markets.”

The legal wrangling in Utah has already had knock-on effects. A DraftKings spokesperson said in a statement Thursday that “effective immediately, sports, novelty, political, and certain other event contracts are no longer available on DraftKings Predictions for customers physically located in Utah.”

“Customers are still able to trade financial event contracts, including those related to stocks, commodities, and cryptocurrency,” they added. “Any open positions customers hold in the affected markets will remain open and settle as normal. DraftKings remains committed to operating responsibly and transparently.”

FanDuel is following suit. A spokesperson said in a statement that starting at 10 a.m. ET Friday morning, event contracts on “sports, politics, and novelties will no longer be available to customers in Utah through FanDuel Predicts.”

“Customers will still be able to trade on economic benchmarks and key financial indicators,” they added. “Any positions held by customers will remain open and settle as expected.”

A representative for Polymarket did not immediately respond to a request for comment on whether it will also stop offering sports and other contested event contracts in Utah.

Thursday also saw a bipartisan duo of lawmakers, Sen. Elizabeth Warren (D., Mass.) and Sen. John Curtis (R., Utah), raising concerns to Mansour and Polymarket CEO Shayne Coplan about election-related markets. The politicians asked those two to provide information about their companies’ “efforts to prevent insider trading, market manipulation, and wagers based on material nonpublic information.”

Curtis is among the many lawmakers who have taken aim at prediction markets this year. In March, he and Sen. Adam Schiff (D., Calif.) introduced a bill that would block platforms from offering sports event contracts.