In unprecedented move, Arizona files criminal charges against prediction market company Kalshi
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Attorney General Kris Mayes filed criminal charges against Kalshi for illegal gambling and election betting, a first among U.S. states.
This article was originally published by Arizona Mirror.
Arizona Attorney General Kris Mayes filed criminal charges against the online prediction market company Kalshi, accusing it of operating an illegal gambling business in the state and flagrantly violating a state law barring wagering on elections.
“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,” Mayes said in a press release announcing the charges. “No company gets to decide for itself which laws to follow.”
Mayes’ case marks the first time a state has pursued criminal charges against the company. The 20-count criminal information filed in Maricopa County Superior Court claims Kalshi broke Arizona law prohibiting the operation of an unlicensed wagering business and similarly broke the law by allowing bets on Arizona elections. All of the alleged crimes are misdemeanors, and all are being leveled against the company, not its executives.
Some of the bets Mayes’ singled out include betting on the 2028 Presidential election results, if Republican Andy Biggs would win the Arizona governors race, if Elon Musk would attend the Super Bowl and if a Democrat would win the Arizona Secretary of State race. Mayes’ charges focused primarily on Arizona sports and election bets, though some charges include federal election bets, as well as sports contests in other states.
The New York-based company has been center stage in an ongoing battle over how to regulate prediction markets, which allow for bets on a variety of topics, from sports to politics to the war in Iran. The prediction markets have also been accused of insider trading, as unknown people have made large sums of money off real world events.
“These state-court charges are seriously flawed. It’s gamesmanship,” Kalshi said in a statement to the Arizona Mirror. The company preemptively sued the state last week in federal court, arguing that it is regulated by federal guidelines, not state laws.
Kalshi claims that Mayes’ charges are to “circumvent federal court and short-circuit the normal judicial process,” adding that they believe the charges “are meritless, and we look forward to fighting them in court.”
In 2024, Kalshi won a landmark case in federal court when the U.S. Court of Appeals for the D.C. Circuit ruled that the Commodity Futures Trading Commission couldn’t block its election wagering under federal law. As a result, the company now operates as a “designated contract market” that is regulated by the CFTC.
Mayes is arguing that Kalshi’s authority to operate under federal law doesn’t preempt Arizona’s criminal laws, setting up a federalism clash that could reverberate nationwide, as more than a dozen states similarly outlaw gambling on elections. She said she is undeterred by the federal court ruling.
“Arizona will not be bullied into letting any company place itself above state law,” Mayes said in her statement on the charges Tuesday.
States have been feuding with Kalshi and other predictive markets and the federal government over just how to regulate the sites which President Donald Trump’s eldest son, Donald Trump Jr., has a vested interest in. However, while other states — including Illinois, Montana and Ohio — have issued cease-and-desist orders to Kalshi, and the company is facing civil lawsuits in Maryland, New Jersey and Nevada, Arizona is the first to pursue criminal charges against the company.
Arizona earlier issued a cease-and-desist letter to Kalshi.