Kalshi’s legal woes are piling up, as Arizona files first-ever criminal charges for ‘illegal gambling business’

Arizona Attorney General Kris Mayes filed criminal charges against the prediction market platform Kalshi for allegedly operating an illegal gambling business in the state without a license and betting on elections.

The 20-count complaint, filed in Maricopa County court on Tuesday, accuses the company of engaging in unauthorized gambling activities, saying the site “accepted bets from Arizona residents on numerous events,” including state elections, a practice that is illegal in Arizona. The complaint charged Kalshi with four counts of election betting for accepting bets from Arizona residents in the 2028 presidential race, the 2026 Arizona gubernatorial race, the 2026 Arizona Republican primary gubernatorial race, and the 2026 Arizona secretary of state race.

It’s the first time the state has prosecuted a company like this, according to AZ Mirror, and it marks a major escalation in the battle between the state and the prediction market industry.

“Kalshi may present himself as a ‘prediction market,’ but what he actually does is conduct illegal gambling and betting on Arizona elections, both of which violate Arizona law,” Attorney General Mayes said in a statement. “No company decides for itself what rules to follow.”

It is important to note that the costs are technically criminal. They followed a flurry of cease-and-desist letters, lawsuits, and other legal actions from states regarding Kalshi’s operations, with many officials complaining that the company was violating state gambling laws.

In contrast, prediction sites like Kalshi have argued that they are not in violation of state law because they are subject to federal regulations through the Commodity Futures Trading Commission.

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

Kalshi sued the Arizona Department of Sports in federal court on March 12. The company’s lawsuit said Arizona’s regulatory efforts encroached on “the federal government’s exclusive authority to regulate derivatives exchanges.” Kalshi also sued Iowa and Utah on similar grounds.

Mayes’ office says the company is just trying to avoid accountability.

“Kalshi makes a habit of suing states instead of following their laws. Only three weeks ago, the company filed lawsuits against Iowa and Utah, and now Arizona,” Mayes said in a statement. “Instead of working within established legal entities like Arizona, Kalshi is running to federal court to try to avoid accountability.”

Elisabeth Diana, Kalshi’s head of communications, called the Arizona criminal charges “grossly flawed” and “game playing” related to the company’s lawsuit against the state.

“Four days after Kalshi filed the case in federal court, these charges were filed to avoid federal court and to shorten the normal judicial process,” said Diana. “They’re trying to prevent the federal courts from reviewing the case based on merits — that Kalshi is subject to special federal jurisdiction. These cases are not meritorious, and we look forward to fighting them in court.”

Federal officials have signaled that they are on the side of the forecasting industry, setting up a potential regulatory struggle between the states and the federal bureaucracy. Michael Selig, chairman of the Commodity Futures Trading Commission, recently published an op-ed in the Wall Street Journal in which he accused state governments of “legislatively attacking the CFTC’s authority to regulate” these areas. Selig also said that his agency will no longer “stand idly by while overzealous state governments” undermine the agency’s “special authority” over the industry.