Kalshi’s legal troubles pile up, as Arizona files first ever criminal charges over ‘illegal gambling business’

Arizona Attorney General Kris Mayes has initiated criminal proceedings against the prediction market platform Kalshi, accusing the company of running an unlicensed gambling operation and engaging in illegal election wagering in the state.

The 20-count complaint, submitted to the Maricopa County court on Tuesday, alleges that Kalshi conducted unauthorized gambling activities by allowing Arizona residents to place bets on various events, including state elections, which is illegal in Arizona. The charges against Kalshi include four counts related to election wagering, specifically for accepting bets on the 2028 presidential race, the 2026 Arizona gubernatorial race, the 2026 Arizona Republican gubernatorial primary, and the 2026 Arizona secretary of state race.

This action marks the first instance of a state filing such charges against Kalshi, according to the AZ Mirror, highlighting a major intensification in the conflict between state authorities and the prediction market sector.

“Kalshi may label itself as a ‘prediction market,’ but in reality, it is operating an illegal gambling business and accepting bets on Arizona elections, both of which contravene Arizona law,” Attorney General Mayes stated. “No company can choose which laws to follow on its own accord.”

The charges, which are misdemeanors, follow a wave of cease-and-desist letters, lawsuits, and other official measures from states against Kalshi’s operations. Many officials have expressed concerns that the company is circumventing state gambling regulations.

On the other hand, prediction platforms like Kalshi contend that they comply with federal regulations through the Commodity Futures Trading Commission, thus not violating state laws.

While facing significant legal challenges, Kalshi has also engaged in its own proactive legal strategies.

Kalshi has filed a lawsuit against Arizona’s Department of Gaming in federal court on March 12. The lawsuit argues that Arizona’s regulatory actions infringe on the federal government’s sole authority to oversee derivatives trading on exchanges. Kalshi has also initiated legal action against Iowa and Utah on similar grounds.

Mayes’ office contends that the company is attempting to evade responsibility.

“Kalshi consistently resorts to suing states instead of complying with their laws. In just the past three weeks, the company has filed lawsuits against Iowa, Utah, and now Arizona,” Mayes remarked. “Rather than adhering to the legal frameworks established by states like Arizona, Kalshi seeks refuge in federal court to avoid accountability.”

Elisabeth Diana, head of communications for Kalshi, described the Arizona charges as “seriously flawed” and part of a “gamesmanship” strategy connected to the company’s own legal actions against the state.

“These charges were filed just four days after Kalshi took federal court action, aiming to bypass federal court and disrupt the standard judicial process,” Diana stated. “They intend to block federal courts from assessing the case on its merits — whether Kalshi falls under exclusive federal jurisdiction. These charges lack merit, and we are eager to contest them in court.”

Federal authorities have indicated support for the prediction market industry, potentially setting the stage for a regulatory conflict between states and the federal government. Michael Selig, chair of the Commodity Futures Trading Commission, recently expressed in a Wall Street Journal op-ed that state governments have been “engaging in legal attacks on the CFTC’s authority to regulate” such platforms. Selig further asserted that the agency would no longer “remain passive while overzealous state governments” undermine its “exclusive jurisdiction” over the industry.