KALSHI FOUNDERS FACE FELONIES. THE FEDS SAY KEEP GOING
Utah says what Kalshi is doing is a crime. Kalshi's federal regulator has ordered it to keep doing it. Kalshi raised $1 billion the next day anyway.
The charges
On Wednesday, Utah Attorney General Derek Brown filed criminal charges against Kalshi and its co-founders, CEO Tarek Mansour and COO Luana Lopes Lara. Per KSL, the counts are:
- One second-degree felony for a pattern of unlawful activity
- 12 third-degree felonies for promoting online gambling
- One class A misdemeanor
The sting was simple. A state agent opened an account under a fake name with an undercover debit card. Over 11 days he placed a dozen bets on NFL and MLB games, Utah vs. Utah State and a Real Salt Lake match, while repeatedly confirming he was in Utah.
"Calling it a 'prediction market' doesn't change what it is," Brown said. Kalshi called the charges a "crazy overreach" and said Utah "is clearly playing politics."
Illegal either way
Matt Levine, writing in his Money Stuff newsletter (Bloomberg Opinion), calls it an absolute legal mess. Here is his case, paraphrased.
Kalshi is plainly breaking Utah law. It sued to get a ruling that Utah law doesn't apply, and it lost in August. It kept taking Utah bets.
But Kalshi is regulated by the Commodity Futures Trading Commission. The CFTC sued Utah this week to knock out the state's law. And in August, after New York sued Kalshi and asked for at least $36 billion, the CFTC used its emergency powers to order Kalshi to keep running its exchange as normal.
So arguably it is illegal under Utah law for Kalshi to take the bets, and illegal under its federal regulator's orders to stop. Levine isn't weeping for anyone. In his words, "this is definitely a problem Kalshi created for itself." He expects the Supreme Court to settle it eventually.
The scoreboard
- Kalshi is in litigation with roughly 20 states. The CFTC has now sued 10 of them, including New York, Illinois and Arizona.
- Arizona filed criminal charges first. That case is on hold.
- On Thursday Kalshi raised $1 billion at a $40 billion valuation, up from $5 billion a year ago.
Felony charges and a $40 billion valuation in the same week. Neither side is folding.
Photo: Kalshi co-founder Luana Lopes Lara, via the New York Post.
