Utah on Wednesday filed criminal charges against prediction market operator Kalshi and two of its executives, months after a federal judge rejected Kalshi’s effort to prevent Utah from enforcing its strict anti-gambling laws against the activity.

The felony charges, which include 13 counts of violating the state's prohibition on gambling and another charge involving profiting off illegal activity, could represent a new tactic in how states try to assert regulatory authority over the fast-expanding prediction market industry.

The state's charging documents name Kalshi and its co-founders, chief executive officer Tarek Mansour and chief operating officer Luana Lopes Lara. Utah Attorney General Derek Brown said in a statement that Kalshi has continued to operate in Utah, despite a federal court ruling that Utah's gambling laws apply to the company.

"Gambling is illegal in Utah, whether you place the bet, run the game, or promote it. Calling it a ‘prediction market’ doesn’t change what it is, and being federally registered doesn’t put a company above the law," Brown stated. The attorney general's office did not immediately say what sort of criminal penalties it would seek, though the felony charges carry the possibility of jail time.

In a statement, Kalshi called the charges a "crazy overreach" and said that "Utah is clearly playing politics." The company added, "We look forward to putting a stop to this in court, just like we did in Arizona."

Utah has been at the forefront of a dispute between states and the federal government over who regulates prediction markets. Litigation has spread across approximately 20 states, creating a fragmented legal landscape that analysts believe will likely be settled by the U.S. Supreme Court.

Kalshi has maintained that prediction markets fall exclusively under federal jurisdiction and are not governed by state gambling laws. Under the Trump administration, the Commodity Futures Trading Commission, the federal agency responsible for regulating financial markets, agreed with Kalshi and has sued at least 10 states, including Utah, to try to prevent them from regulating prediction markets.

Arizona became the first state to file criminal charges against Kalshi earlier this year, accusing it of operating an illegal gambling business within its borders. A judge later put that case on hold. However, one legal analyst, Daniel Wallach, suggested that Arizona’s authority to pursue the misdemeanor charges could soon be restored after the 9th U.S. Circuit Court of Appeals in San Francisco refused to let Kalshi restart trading on sports and elections events in Nevada while it fights the state’s effort to shut it down.

Wallach, a lawyer specializing in sports wagering and gaming law who teaches at the University of Miami School of Law, noted that Utah’s pursuit of felony charges represents a potential shift in strategy by states that have primarily pursued civil actions against prediction market operators. He expects to see states bring more cases like Utah’s, calling Utah’s criminal charges “a bellwether for how other states approach Kalshi and Polymarket" following Nevada's appellate court victory.

Kalshi sued Utah in February, asking a federal judge to prevent the state from enforcing its gambling restrictions on the platform. The lawsuit emerged as Utah was close to enacting legislation intended to prevent prediction markets from operating in the state. A federal judge rejected Kalshi’s request, stating that the Commodity Exchange Act, the federal law Kalshi cited in its argument, does not prevent the state from enforcing its laws. The 10th U.S. Circuit Court of Appeals in Denver last month declined to halt Utah's regulatory enforcement during Kalshi's appeal.

Last week, Utah also sued Kalshi and several related companies in state court, asking the court to stop the platform from trading on sports, elections, politics, culture, and other outcomes in Utah. The state is also seeking to use a court-approved geolocation provider to enforce such a ban and asked the court to order the defendants to forfeit profits made in Utah.