The Vanity Fair article says "Kahneman and Tversky debunked Bernoulli’s utility theory, a cornerstone of economic thought since the 18th century. (Bernoulli first proponed that a person’s willingness to gamble a certain amount of money was a product of how that amount related to his overall wealth—that is, $1 million means more to a millionaire than it does to a billionaire.)"

But in the lecture, Kahneman stated no qualms with utility theory. Rather, he pointed to the application of the theory, where Bernoulli had assumed a gain of $1 million is equivalent to $1 million appearing in their bank account, with the mechanism being irrelevant. That is what prospect theory (and the associated question) debunks.