The state of Arizona has initiated criminal misdemeanor charges against Kalshi, a prediction market platform, alleging that it is running an illegal gambling business and improperly allowing bets on elections. This marks a significant first, as it is the initial case of its kind brought by a U.S. state.
Arizona Attorney General Kris Mayes filed the charges in a 20-count criminal information in the Maricopa County Superior Court. The allegations claim that the New York-based company accepted wagers from residents of Arizona on a variety of events, including sports and political races.
According to prosecutors, Kalshi permitted bets on both professional and college sports, as well as on elections, including the 2028 U.S. presidential election and several Arizona contests set for 2026, such as the gubernatorial race, the Republican primary, and the secretary of state election.
“Kalshi may market itself as a 'prediction market,' but in reality, it is operating an illegal gambling operation and accepting bets on Arizona elections, both of which breach Arizona law,” stated Mayes.
This case highlights an escalating legal conflict between state regulators and companies that provide prediction market services, which enable users to trade contracts linked to the outcomes of real-world events.
Kalshi contends that its event contracts are under the sole jurisdiction of the Commodity Futures Trading Commission, rather than state gambling regulations. During President Donald Trump's administration, the regulator supported prediction markets in disputes with states that argue these platforms constitute unlicensed gambling.
In light of the charges, Kalshi expressed disappointment, stating that “a state can file criminal charges based on flimsy arguments,” and emphasized that its platform “should not be governed by a patchwork of inconsistent state laws.”
“States like Arizona are attempting to individually regulate a national financial exchange and are employing every strategy available to achieve this,” the company added.
Kalshi had previously attempted to halt Arizona's actions by filing a lawsuit in federal court, but U.S. District Judge Michael Liburdi rejected its request for a temporary restraining order.
As of now, no other state has pressed criminal charges against Kalshi. However, Massachusetts, Nevada, and Michigan have taken civil actions to stop Kalshi from offering sports event contracts. A judge in Massachusetts has issued an injunction against such offerings, although this ruling is currently on hold pending an appeal.