Arizona Attorney General Kris Mayes has filed criminal charges against prediction markets platform Kalshi, accusing it of operating an unlicensed gambling business and offering illegal election wagering within the state. The charges, filed on Tuesday, allege that KalshiEx LLC and Kalshi Trading LLC committed 20 counts of violating Arizona law by accepting bets on a wide range of events, including sports and elections such as the 2028 presidential race and the 2026 state gubernatorial race.
"Arizona law prohibits operating an unlicensed wagering business, and separately bans betting on elections outright," Mayes stated. She emphasized that "Kalshi may brand itself as a 'prediction market,' but what it's actually doing is running an illegal gambling operation and taking bets on Arizona elections."
The legal action represents a direct clash with recent federal regulatory developments. Just days prior, the Commodity Futures Trading Commission (CFTC), under Chairman Mike Selig, signaled a more supportive stance. The CFTC issued new guidance and launched a rulemaking process, asserting its "exclusive jurisdiction" over event contracts and framing platforms like Kalshi as regulated derivatives venues rather than gambling operators.
Kalshi has positioned its event contracts as federally regulated derivatives, a distinction now being tested across multiple jurisdictions. A company spokesperson responded, "Sadly, a state can file criminal charges on paper thin arguments... As other courts have recognized and the CFTC affirms, Kalshi is subject to federal jurisdiction." The spokesperson argued that a "patchwork of inconsistent state laws" should not oversee what they describe as a nationwide financial exchange.
The charges escalate an ongoing legal battle. Kalshi had preemptively sued Arizona on March 12, part of a broader litigation strategy that recently included lawsuits against Iowa and Utah. "Kalshi is making a habit of suing states rather than following their laws," Mayes criticized, noting the company filed suits against three states in three weeks.
Court rulings on the matter have been inconsistent. A federal judge in Nevada ruled last year that Kalshi's sports-related contracts are subject to state gaming regulators, while a Massachusetts state court reached a similar conclusion. Conversely, a federal judge in Tennessee earlier this year temporarily blocked state regulators from enforcing a cease-and-desist order against Kalshi. Notably, most prior cases involved sports gambling, whereas Arizona's case focuses significantly on election-related bets.
The filing also cited a recent setback for Kalshi in Ohio, where a judge denied the firm's request for a preliminary injunction and affirmed the state's authority to enforce its gambling laws. This legal conflict highlights the fundamental tension between state-level gambling regulations and the federal framework for derivatives, setting a significant precedent for the future of prediction markets in the United States.
