The U.S. prediction market platform Kalshi is facing criminal charges for allegedly operating an unlicensed event market in Arizona, leading to a tense standoff between state authorities and federal regulators over jurisdiction regarding such platforms.
Arizona prosecutors have accused Kalshi of violating state laws that prohibit unlicensed betting activities. Among the 20 charges, 4 are directly related to betting activities on election markets, including the 2028 U.S. presidential election and the 2026 gubernatorial and secretary of state races in Arizona, even including the Republican gubernatorial primary. Arizona law explicitly prohibits any form of betting related to elections.
Additionally, the charges involve betting on professional and collegiate sports events. Authorities claim that Kalshi allows users to bet on individual player performance statistics and legislative progress, such as predictions on whether federal bills (like the SAVE Act) will pass. The state prosecutor believes these activities fall squarely within the realm that Arizona requires formal licensing and regulation.
Arizona Attorney General Mayes reiterated the state's regulatory stance, publicly stating that Kalshi's positioning as a “prediction market” does not exempt it from Arizona law. She emphasized, “Kalshi can brand itself as a ‘prediction market,’ but what it is actually doing is operating illegally. No company can unilaterally decide which laws to follow.” Mayes stressed that Arizona's requirements for all market operators are uniform and pledged to enforce state regulations rigorously, characterizing Kalshi's actions as an attempt to evade the framework set by lawmakers and regulators.
Prior to the criminal charges, Kalshi had filed a lawsuit in federal court on March 12, attempting to challenge Arizona's restrictions. This strategy mirrors Kalshi's recent lawsuits in Iowa and Utah, marking a broad legal effort to contest state regulations on event markets. Attorney General Mayes pointed out this pattern, suggesting that Kalshi prefers to resolve issues through litigation rather than cooperation.
In Ohio, Federal Judge Sarah Morrison denied Kalshi's request for a preliminary injunction, supporting state authorities' regulatory authority over event markets. Judge Morrison acknowledged that states have significant public welfare interests in regulating these platforms and maintaining order within their jurisdictions.
Meanwhile, the U.S. Commodity Futures Trading Commission (CFTC) is working to establish a federal regulatory framework for event contracts, further intensifying the tension between state and federal oversight of such platforms.