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Kris Mayes has initiated 20 criminal charges against the prediction market operator, intensifying a multi-state legal dispute over sports and election prediction markets.
The Arizona Attorney General has brought charges against Kalshi, alleging it has facilitated unlawful gambling within the state. (Credit: Pixabay/Modified by CoinDesk)
What to know:
- Arizona Attorney General Kris Mayes has submitted 20 criminal counts against the prediction markets platform Kalshi, accusing it of running an unlicensed gambling operation and providing illegal election wagering within the state.
- This legal action coincides with the Commodity Futures Trading Commission’s movement towards a more favorable federal approach to prediction markets, claiming exclusive authority over event contracts and categorizing platforms like Kalshi as derivatives venues instead of gambling operators.
- The Arizona case heightens Kalshi’s ongoing legal challenges with state authorities, following the company’s preemptive lawsuits against multiple states that have encountered certain legal obstacles.
Arizona Attorney General Kris Mayes has charged Kalshi Tuesday, alleging that the prediction markets platform is conducting an unlicensed gambling enterprise and offering election wagering in the state, which she claims contravenes state laws.
Mayes has charged KalshiEx LLC and Kalshi Trading LLC with 20 counts, asserting that the platform accepted wagers from Arizona on various events in violation of state law, encompassing sports and elections, including contracts betting on the outcomes of the 2028 presidential election and the 2026 state gubernatorial race.
“Arizona law forbids the operation of an unlicensed wagering business, and additionally prohibits betting on elections entirely,” the attorney general stated.
The charges follow closely on the heels of the Commodity Futures Trading Commission (CFTC) indicating a more supportive federal position towards prediction markets, issuing fresh guidance and initiating a rulemaking process under Chairman Mike Selig.
This initiative emphasizes the CFTC’s “exclusive jurisdiction” over event contracts and positions platforms like Kalshi as regulated derivatives venues rather than gambling operators, creating a direct conflict with states like Arizona that continue to regulate sports and election-related contracts.
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“Regrettably, a state can file criminal charges based on tenuous arguments,” a Kalshi representative stated. “States such as Arizona want to individually regulate a nationwide financial exchange and are attempting every tactic possible to achieve this. As recognized by other courts and affirmed by the CFTC, Kalshi is under federal jurisdiction. It differs from what sportsbooks and casinos provide their clients, and should not be governed by a patchwork of inconsistent state regulations.”
Various courts have ruled inconsistently regarding whether providers of prediction markets are subject to state laws. A federal judge in Nevada decided last year that the company’s sports-related contracts fall under state gaming regulators. A Massachusetts state court similarly concluded that sports-related activities might be governed by state regulations in that jurisdiction. Conversely, a federal judge in Tennessee ruled differently earlier this year, temporarily blocking state regulators from enforcing a cease-and-desist order against Kalshi.
It is important to note that most of these contracts and legal matters were associated with sports gambling, rather than election-related wagers, as is the case with Arizona’s charges.
In her statement, Mayes remarked, “Kalshi may market itself as a ‘prediction market,’ but it is essentially operating an illegal gambling venture and accepting bets on Arizona elections.”
She reiterated that state law prohibits both unlicensed wagering businesses and outright betting on elections.
The charges amplify the escalating legal contention between Kalshi and state regulators. The company filed a lawsuit against Arizona on March 12 as a preemptive action, part of a broader strategy that has recently included legal actions against Iowa and Utah, as indicated by Mayes’ filing. Arizona officials have also criticized this strategy, asserting that Kalshi is attempting to circumvent state gambling regulations by resorting to federal courts.
“Kalshi has developed a pattern of suing states instead of complying with their laws,” Mayes commented. “In just the past three weeks, the company has initiated lawsuits against Iowa and Utah, and now Arizona.”
Mayes admonished Kalshi, claiming that instead of adhering to legal frameworks like those in Arizona, “Kalshi is seeking refuge in federal court to evade accountability.”
The filing also referenced a recent federal court setback for Kalshi in Ohio, where a judge denied the firm’s request for a preliminary injunction and upheld the state’s ability to enforce its gambling regulations.
Kalshi has categorized its event contracts as federally regulated derivatives rather than gambling products, a distinction currently being scrutinized across various jurisdictions.
