Kalshi faces criminal charges in Arizona over alleged illegal gambling operations

Arizona Attorney General Kris Mayes has brought criminal charges against prediction market platform Kalshi, accusing the company of running an unlicensed gambling operation in the state and facilitating election-related wagering.

The 20-count complaint, filed Tuesday in Maricopa County court, alleges that Kalshi engaged in illegal gambling activities by accepting bets from Arizona residents on various events. According to the filing, these activities included wagering on state elections, which is prohibited under Arizona law. The charges include four counts specifically related to election betting, tied to wagers placed on the 2028 presidential election, the 2026 Arizona gubernatorial race, the 2026 Arizona Republican gubernatorial primary, and the 2026 Arizona secretary of state race.

According to the AZ Mirror, this marks the first instance of a state pursuing criminal charges against Kalshi, representing a notable escalation in tensions between state regulators and the growing prediction market sector.

“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.”

Although the charges are classified as misdemeanours, they come amid a broader wave of regulatory actions, including cease-and-desist orders, lawsuits, and other enforcement measures from multiple states. Officials have increasingly raised concerns that Kalshi is operating in a way that bypasses state gambling regulations.

Kalshi, along with other prediction platforms, maintains that it is not violating state laws, arguing instead that its activities fall under federal oversight through the Commodity Futures Trading Commission (CFTC).

Despite facing mounting pressure, Kalshi has also taken proactive legal steps. On March 12, the company filed a lawsuit in federal court against the Arizona Department of Gaming, asserting that the state’s regulatory efforts interfere with what it claims is the federal government’s exclusive authority to oversee derivatives trading on exchanges. The company has also filed similar lawsuits against Iowa and Utah.

Attorney General Mayes’ office has criticised this approach, suggesting that Kalshi is attempting to sidestep 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. “Rather than work within the legal frameworks that states like Arizona have established, Kalshi is running to federal court to try to avoid accountability.”

Kalshi has strongly rejected the charges. Elisabeth Diana, the company’s head of communications, described the case as fundamentally flawed and politically motivated, linking it to the company’s ongoing legal dispute with 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.”

At the federal level, regulators have signalled support for the prediction market industry, setting the stage for a potential conflict between state authorities and federal oversight bodies. Michael Selig, chair of the Commodity Futures Trading Commission, recently wrote in a Wall Street Journal op-ed that state governments have been mounting legal challenges against the agency’s authority to regulate such platforms. He also stated that the CFTC would not “sit idly by while overzealous state governments” undermine what it views as its exclusive jurisdiction over the sector.