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Arizona Attorney General Kris Mayes filed 20 criminal charges against KalshiEx LLC and Kalshi Trading LLC on Tuesday, making Arizona the first state to pursue a criminal case against the prediction markets platform over unlicensed gambling and election wagering.
What the Charges Cover
The criminal information, filed in Maricopa County Superior Court, alleges Kalshi accepted bets from Arizona residents on professional and college sporting contests, individual player performance propositions, and a range of political outcomes — all prohibited under state law. Four of the 20 counts relate specifically to election wagering, covering contracts on the 2028 presidential race, the 2026 Arizona gubernatorial race, the 2026 Arizona Republican gubernatorial primary, and the 2026 Arizona Secretary of State race. Prosecutors also allege Kalshi offered contracts on whether federal legislation, including the SAVE Act, would become law.
Penalties under the misdemeanor charges are set at $20,000 per sports bet and $10,000 per election wager. A spokesman for the AG’s office confirmed the Kalshi platform remains operational and is not directly affected by the indictment while the case proceeds.
“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. No company gets to decide for itself which laws to follow.” — Attorney General Kris Mayes
Kalshi’s Position
Kalshi rejected the charges outright. The platform, which is regulated at the federal level by the Commodity Futures Trading Commission, argues its event contracts are fundamentally different from sportsbook products and should not be subject to state gaming laws.
“Sadly, a state can file criminal charges on paper-thin arguments. States like Arizona want to individually regulate a nationwide financial exchange, and are trying every trick in the book to do it. As other courts have recognised and the CFTC affirms, Kalshi is subject to federal jurisdiction. It should not be overseen by a patchwork of inconsistent state laws.” — Kalshi spokesperson
Kalshi pre-empted the charges by suing Arizona in federal court on March 12, seeking a preliminary injunction to block the state from enforcing its gambling laws against the platform. That move followed similar federal lawsuits against Iowa and Utah filed in the preceding three weeks.
A Widening Multi-State Battle
Arizona’s criminal case arrives at a moment of significant legal turbulence for prediction markets across the US. Courts have reached conflicting conclusions on the core jurisdictional question. A federal judge in Ohio recently denied Kalshi’s request for a preliminary injunction, finding the company’s operational interests did not override Ohio’s authority to enforce state law. A federal judge in Nevada previously ruled that Kalshi’s sports-related contracts fall within state gaming regulators’ reach. Massachusetts courts reached a similar conclusion on sports contracts. A federal judge in Tennessee ruled the opposite way earlier this year, temporarily blocking a state cease-and-desist order against Kalshi.
The CFTC, under Chairman Mike Selig, has recently signalled a more supportive federal stance toward prediction markets, issuing new guidance and launching a rulemaking process — a move that directly conflicts with state-level enforcement actions and sets up the core federal-versus-state question that will need resolution, likely at the appellate level.
Sports betting attorney Daniel Wallach, a nationally recognised expert on gambling regulation, framed the stakes clearly: Kalshi’s model is “sports gambling without any of the consumer protections or tax payments or requirements that Arizona specifically requires of its sports-betting operators.”
Context: Kalshi’s Growth and Regulatory Pressure
Kalshi reported $1bn in Super Bowl trading volume in February, up 2,700% year-on-year, and its projected annual revenue stands at around $1bn. That growth has drawn sustained regulatory attention. The platform has surpassed DraftKings and FanDuel in app downloads and launched a prediction markets coalition, but state attorneys general — particularly in Democratic-led states — have consistently pushed back on the federal jurisdiction argument.
The Nevada Gaming Board has also pursued litigation against crypto platforms offering similar event contract products, and Australia’s ACMA has separately classified prediction markets as gambling, reflecting a wider international pattern of regulators pushing back on the CFTC-regulated-derivatives framing.
The Arizona criminal case is now the most aggressive state enforcement action to date. Whether prosecutors can sustain 20 misdemeanor counts against a federally regulated exchange — and whether Arizona courts will accept that state law applies — will shape how far state regulators can push their authority as the CFTC simultaneously moves to consolidate federal oversight.
Source: Arizona Attorney General’s Office
