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

Arizona attorney general Kris Mayes has filed criminal charges against prediction market platform Kalshi for allegedly operating an illegal gambling business in the state without a license and for election wagering.

The 20-count complaint, filed in Maricopa County court on Tuesday, accuses the company of engaging in unlicensed gambling activities, claiming that the site “accepted bets from Arizona residents on a wide range of events,” including state elections, a practice that is illegal in Arizona. The complaint charged Kalshi with four counts of election wagering for accepting bets from Arizona residents 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 is the first time a state has pursued such charges against the company, according to the AZ Mirror, and marks a significant escalation in the battle between states and the prediction market industry.

“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, both of which violate Arizona law,” Attorney General Mayes said in a statement. “No company gets to decide for itself which laws to follow.”

It’s worth noting that the charges are technically misdemeanors. They follow a small surge of cease-and-desist letters, lawsuits, and other official actions from states over Kalshi’s activities, in which numerous officials have complained that the company is skirting state gambling laws.

Conversely, prediction sites like Kalshi have argued that they are not in violation of state law because they are subject to federal regulation via the Commodity Futures Trading Commission.

Kalshi may be getting attacked left, right, and center, but the company has also taken its own, often preemptive, legal action.

Kalshi sued Arizona’s Department of Gaming in federal court on March 12. The company’s lawsuit argued that Arizona’s regulatory attempts were intruding “into the federal government’s exclusive authority to regulate derivatives trading on exchanges.” Kalshi also recently sued Iowa and Utah on similar grounds.

Mayes’ office argues the company is merely trying to avoid accountability.

“Kalshi is making a habit of suing states rather than following their laws. In the last three weeks alone, the company has filed lawsuits against Iowa and Utah, and now Arizona,” Mayes said in a statement. “Rather than work within the legal frameworks that states like Arizona have established, Kalshi is running to federal court to try to avoid accountability.”

Elisabeth Diana, Kalshi’s head of communications, called the Arizona criminal charges “seriously flawed” and a matter of “gamesmanship” related to the company’s own litigation against the state.

“Four days after Kalshi filed suit in federal court, these charges were filed to circumvent federal court and short-circuit the normal judicial process,” Diana said. “They attempt to prevent federal courts from evaluating the case based on the merits — whether Kalshi is subject to exclusive federal jurisdiction. These charges are meritless, and we look forward to fighting them in court.”

Federal officials have signaled that they’re on the prediction industry’s side, setting up a potential regulatory showdown between states and the federal bureaucracy. Michael Selig, chair of the Commodity Futures Trading Commission, recently published an op-ed in the Wall Street Journal in which he accused state governments of having “waged legal attacks on the CFTC’s authority to regulate” such sites. Selig also claimed that his agency would no longer “sit idly by while overzealous state governments” undermined the agency’s “exclusive jurisdiction” over the industry.