Utah Files Criminal Charges Against Kalshi Co-Founders
· Reason
Kalshi CEO Tarek Mansour recently told Reason's Nick Gillespie there's a "big group" of lawmakers in both parties who are "actually" in favor of prediction market platforms. Utah Attorney General Derek Brown is not one of them.
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On Wednesday, Brown filed criminal charges in state court against Kalshi, Mansour, and fellow co-founder and chief operating officer Luana Lopes Lara. Mansour, Lopes Lara, and Kalshi are charged with one count of general gambling promotion, a class A misdemeanor; one count of pattern of unlawful activity, a second-degree felony; and 12 counts of online gambling promotion, a third-degree felony.
The feud between Kalshi and Utah has been brewing for quite some time. In August, U.S. District Court Judge Robert J. Shelby found that federal law did not preempt Utah from enforcing its anti-gambling laws against Kalshi, meaning the platform could not legally operate in the Beehive State. Last week, Utah filed a civil suit against the prediction platform alleging it had continued to engage in a "brazen pattern of unlawful conduct." The criminal case comes a day after the U.S. Commodity Futures Trading Commission (CFTC) filed its lawsuit to block Utah from enforcing its anti-gambling laws against Kalshi.
Even though it's been illegal to use Kalshi in Utah since August, Special Agent Scott Eggerman of the Attorney General's Office was able to "create an undercover Kalshi account, using an undercover name and an undercover Visa Debit Card," according to Wednesday's complaint.
All of Eggerman's personal user information identified him as a Utah resident with a local phone number and bank account through a "Utah-based banking establishment." Over two weeks, Eggerman spent $114.87 on a dozen wagers spread across the NFL, MLB, a local college football game, and a Major League Soccer match involving Utah-based Real Salt Lake. In one instance, he lost $20 on a wager that the Troy Trojans football team would upset the Utah State Aggies.
Utah argues Eggerman should never have been able to set up an account, let alone place any wagers on the platform. When Kalshi challenged Shelby's ruling, it asked the U.S. Court of Appeals for the 10th Circuit for an injunction while the appeal proceeded. However, in September, the 10th Circuit denied Kalshi's request for an injunction pending appeal, meaning Shelby's order remained in effect while the court considered the case.
"A federal court has already ruled that Utah's gambling laws apply to Kalshi," Brown told Deseret News. "Kalshi kept taking bets from Utahns anyway. That is illegal, and we're putting a stop to it."
Utah joins Arizona as the only two states to pursue criminal charges against Kalshi. However, the prediction platform has more than 20 lawsuits and cease and desist actions pending across the country, according to the National Conference of State Legislatures. The issue might soon come before the Supreme Court. Earlier this month, the NFL, 39 states, and Washington, D.C., filed amicus briefs, arguing that conflicting decisions in the 6th and 9th Circuit Courts of Appeals left them unsure whether the states or the CFTC has regulatory authority over prediction markets.
In a statement to the Deseret News, a Kalshi spokesperson called the criminal charges a "crazy overreach" and said Brown was "playing politics." With Shelby's ruling still in effect, so long as Utah considers Kalshi a gambling platform, its continued operation violates state law. Still, the criminal charges are an attempt to strong-arm Kalshi into acquiescing to his demands instead of letting the pending court case play out.
Utah acknowledges that there's been a "rapid increase in volume on the Kalshi platform" from users in the Beehive State. Yet its attorney general seems intent on restricting adults in the state from spending their money as they see fit.
The post Utah Files Criminal Charges Against Kalshi Co-Founders appeared first on Reason Magazine.