Federal Government Asks Court To Halt Utah’s Criminal Case Against Kalshi

The CFTC and the US government have asked a federal judge in Utah to stop the state from pursuing its criminal and civil cases against Kalshi, one day after prosecutors charged the prediction market operator and its two co-founders.

The federal government has asked a court to freeze Utah’s prosecution of Kalshi, setting up a direct clash in Salt Lake City over whether a state can criminally charge a federally registered exchange and its founders for offering sports event contracts.

The United States and the Commodity Futures Trading Commission (CFTC) filed an emergency motion for a temporary restraining order and preliminary injunction on Thursday, October 29, in the US District Court for the District of Utah. The motion is part of their October 26 lawsuit against the State of Utah and Attorney General Derek Brown, which argues that federal commodities law preempts Utah’s gambling laws for event contracts on CFTC-regulated exchanges. Kalshi is not a party to that case.

District Judge Robert J. Shelby did not rule on the request straight away. In an order dated October 30, he scheduled an in-person status and scheduling conference on the motion and the complaint for Friday, November 6, at 1:00 PM in Courtroom 3.100.

What the federal government wants the court to order

The proposed order submitted with the motion goes well beyond Kalshi’s own cases. If Judge Shelby signed it as drafted, Utah would be “enjoined from pursuing criminal or civil enforcement actions related to event contracts listed on CFTC-regulated DCMs,” a reference to designated contract markets.

That bar would cover “continued litigation of any pending criminal or civil enforcement suits against any CFTC-Designated Contract Markets or Futures Commission Merchants and their officers,” as well as any “further criminal or civil enforcement actions, subpoena process, or other compulsory investigative process.” The draft also directs Utah to “either dismiss any applicable enforcement actions or seek stays in those cases until otherwise directed by this Court.”

The proposed order states that the United States and the CFTC are likely to succeed on their claim that Utah’s gambling laws, as applied to event contracts on CFTC-regulated exchanges, are preempted by the Commodity Exchange Act (CEA), and that they “will suffer irreparable harm” without an injunction. The full brief supporting the motion was not available in the public RECAP archive as of Friday evening, according to RG.org.

Judge Shelby’s scheduling order sets two deadlines ahead of the hearing. The federal plaintiffs must serve the order, the motion and the complaint on both defendants by 5:00 PM on Tuesday, November 3, and file proof of service on the docket by 5:00 PM on Wednesday, November 4.

Utah’s criminal case against Kalshi and its founders

The motion landed a day after Attorney General Brown’s office filed a charging document in the Third District Court in Salt Lake County. Dated October 28, it lists 14 counts against KalshiEX LLC, with CEO Tarek Mansour and COO Luana Lopes Lara named as co-defendants. The counts are one charge of pattern of unlawful activity, a second-degree felony; 12 counts of online gambling promotion, third-degree felonies; and one count of gambling promotion, a Class A misdemeanor.

According to a probable cause declaration described by RG.org, a special agent opened an undercover Kalshi account on September 13 using a Utah address, phone number and debit card. Between September 13 and September 24 he placed 12 wagers on NFL, college football, MLB, MLS and NHL events from inside the state, with stakes ranging from $4 to $30. No arrest warrants were sought, and the co-founders were instead summoned to respond. The charges are allegations, and no court has ruled on them.

“A federal court has already ruled that Utah’s gambling laws apply to Kalshi,” Brown said in a statement reported by KUER. “Kalshi kept taking bets from Utahns anyway. That is illegal, and we’re putting a stop to it.”

Kalshi rejected the case outright. In a statement carried by KUER, the company called it “a crazy overreach; Utah is clearly playing politics. We look forward to putting a stop to this in court, just like we did in Arizona.” Arizona became the first state to file criminal charges against Kalshi earlier this year, according to the Associated Press. Gambling Insider’s earlier coverage of the Utah charges sets out how the criminal filing followed the state’s civil suit.

Sports betting attorney Daniel Wallach shared the charging papers against Mansour on X shortly after they were filed.

How the Utah dispute escalated

Utah has been fighting Kalshi in court for most of the year, and the state has won both rulings in Kalshi’s federal case so far. Kalshi sued Utah officials in federal court in February, and on August 4 Judge Shelby granted summary judgment to the state. In his memorandum decision, he concluded that “the CEA does not preempt Utah’s enforcement of its anti-gambling laws against Kalshi” and wrote that “enforcement of State gambling laws is not inconsistent with the CFTC’s regulation and oversight of derivatives markets.” The Tenth Circuit denied Kalshi’s request for an injunction pending appeal on September 8.

On October 20, Utah filed a civil enforcement action in state court against Kalshi entities and two Susquehanna trading firms. The federal complaint quotes that filing as alleging that “Kalshi’s online gambling bets are indistinguishable from the bets offered by a traditional sportsbook.” Six days later, the United States and the CFTC sued the state, a move Gambling Insider covered in its report on the CFTC’s suit against Utah.

The same week, the other side lined up behind Utah at the appeals court. Wallach noted on X that 37 states filed an amicus brief backing Utah against Kalshi in the Tenth Circuit.

The table below sets out where each front of the Utah dispute stands.

The federal case for preemption

The CFTC has framed the Utah suit as part of a national campaign to defend its authority. When it announced the case, the agency said it had “initiated legal proceedings against nine other states and has submitted briefs in four federal courts of appeal and one state supreme court.”

“Utah seeks to shut down prediction markets across a wide variety of markets,” CFTC Chairman Michael S. Selig said in the same release. He added that “Congress entrusted the CFTC to be the federal regulator with sole responsibility to oversee these markets.”

The federal complaint argues that the event contracts Utah is targeting are “swaps” under the CEA and that the exchanges listing them are CFTC-regulated designated contract markets. It names the nine states the CFTC has already taken to court: Arizona, Connecticut, Illinois, Kentucky, Minnesota, New Mexico, New York, Rhode Island and Wisconsin.

On the need for urgent relief, the complaint states that “if Utah is permitted to enforce its gambling laws against CFTC-regulated transactions and markets, the harm to the United States’s sovereign interests and regulatory jurisdiction could not be undone after final judgment.”

The federal government also faces a judge who has already decided the core legal question against the prediction market side. Wallach pointed out on X that Shelby, now assigned to the case, entered the only final merits judgment on CEA preemption in a prediction markets case.

Elsewhere in the state, Crypto.com-backed OG.com has launched its own challenge seeking protection from enforcement in Utah.

What happens next

The immediate focus is the November 6 conference in Salt Lake City, where Judge Shelby will take up the motion and the complaint with both sides in the room. No ruling on the restraining order request had been issued at the time of writing.

If the court were to grant the order in the form the federal government has proposed, Utah would have to dismiss or seek stays of its pending enforcement cases, including the criminal counts against Kalshi and its co-founders. If it declines, the state’s civil and criminal cases can continue in the Third District Court while the federal suit proceeds.

Kalshi’s appeal of the August judgment remains pending in the Tenth Circuit. With a federal agency now asking a court to halt a state criminal prosecution, Utah has become one of the clearest tests yet of how far federal authority over event contracts reaches.

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