Kalshi co-founder challenges Arizona’s ‘overreach’ in what an attorney describes as a conflict between federal and state authority.

Arizona has initiated 20 criminal charges against Kalshi, a prediction market platform, alleging that it operates an unlawful gambling business and facilitates election betting within the state.

Kalshi logo (Getty Images)

What to know:

• Arizona has initiated 20 criminal charges against Kalshi, a prediction market platform, alleging it operates an unlawful gambling business and facilitates election betting within the state.
• Kalshi’s co-founder termed the allegations a “total overstep,” contending that Arizona is attempting to contest federal oversight of the platform, which is regulated by the CFTC.
• This case is part of a larger national dispute between states and federally regulated prediction markets, raising questions about the relevance of federal law in contrast to state regulations.

In this article

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Kalshi co-founder Tarek Mansour characterized Arizona’s criminal case against the company as a “total overstep,” framing the action as an assault on a federally regulated exchange instead of a typical gambling enforcement measure.

Mansour asserted that the charges “have no relation to gambling or the merits” and claimed that Arizona is attempting to bypass a larger judicial dispute regarding jurisdiction over prediction markets. In comments to Bloomberg, he indicated that Kalshi will persist in defending the business as the legal confrontation widens.

Kalshi did not respond to CoinDesk’s request for remarks.

Arizona Attorney General Kris Mayes filed 20 criminal charges against Kalshi this week, claiming the company operates an unlawful gambling business and offers election betting within the state.

Her office stated that Arizona law prohibits both unlicensed betting operations and election wagering.

Kalshi enables users to trade contracts linked to real-world outcomes such as elections, sports, and economic indicators. The firm asserts that these products are event contracts regulated by the Commodity Futures Trading Commission (CFTC), which has recently indicated a more favorable federal attitude towards such platforms. Kalshi, alongside Polymarket, represents a significant portion of prediction market activity, accounting for over 90% of notional volume, as per Dune data.

In a social media post, CFTC Chairman Mike Selig referred to the situation as a jurisdictional conflict, stating that criminal prosecution is “entirely inappropriate.” He mentioned that the agency is closely monitoring the situation and assessing its options.

The Arizona Attorney General today filed criminal charges against one of our registered exchanges related to prediction markets. This is a jurisdictional dispute and entirely inappropriate as a criminal prosecution. The @CFTC is watching this closely and evaluating its options.

— Mike Selig (@ChairmanSelig) March 17, 2026

State officials in Arizona and other locations contend that some of these activities resemble wagers and should be classified under state gambling regulations.

This division is now at the core of a larger national contention involving various states, including New York, Tennessee, and Massachusetts. Most state actions against Kalshi to date have relied on cease-and-desist orders, injunction requests, or civil claims. Arizona’s case is more aggressive, as it introduces criminal charges.

“It’s not surprising at all that states would bring new tools to bear in attempting to chill the federally regulated markets,” Aaron Brogan, founder and managing attorney of Brogan Law PLLC, told CoinDesk. “Because there is a fundamental conflict between states, which regulate and draw tax revenue from state-regulated gambling markets, and these federally regulated markets that are outside of state control.”

For Brogan, the ultimate question is whether federal law applies, suggesting that the dispute should be resolved between the federal government and state government.