Arizona AG charges Kalshi with illegal betting as state battles widen

The battle over whether or not states have the right to regulate, or ban, prediction markets intensified Tuesday as Arizona Attorney General Kris Mayes filed criminal charges against Kalshi.

"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," Mayes said in a statement. "No company gets to decide for itself which laws to follow."

While Kalshi has faces other legal battles in states like Ohio and Tennessee, the prediction platform has argued that the events contracts it offers are regulated under the Commodity Exchange Act, which is enforced by the Commodity Futures Trading Commission (CFTC), and that federal authority supersedes state law.

Arizona's attorney general disagrees.

"The 20-count criminal information alleges that Kalshi accepted bets from Arizona residents on a wide range of events in violation of Arizona law," Mayes office said, adding that Kalshi allowed people to bet on both professional and college sporting events, individual player performance prop bets, and elections.

"Among the charges are four counts of election wagering, including bets on the 2028 presidential race, the 2026 Arizona gubernatorial race, the 2026 Arizona Republican gubernatorial primary, and the 2026 Arizona Secretary of State race," the attorney general's office also said.

Kalshi and Polymarket rose to prominence during the 2024 U.S. elections with heavy betting placed on who would win the presidential race. So far, President Trump's administration has been crypto-friendly and appears prepared to support prediction platforms.

The CFTC has maintained that properly structured contracts fall under the federal derivatives framework. Last week, CFTC Chairman Mike Selig said regulators are working to establish clearer rules for the fast-growing sector. Selig contributed to an amicus brief with other CFTC officials supporting Crypto.com's prediction market operations in the state of Nevada.
 
"Kalshi is making a habit of suing states rather than following their laws. In the last three weeks alone, the company has filed lawsuits against Iowa and Utah, and now Arizona," added Mayes. "Rather than work within the legal frameworks that states like Arizona have established, Kalshi is running to federal court to try to avoid accountability."

Arizona prohibits unlicensed companies from offering betting and has banned wagering on elections.

Mayes belongs to the Democratic Party.

Multi-billion dollar valuations

As legal issues over how prediction markets should be regulated remain unresolved, both Kalshi and Polymarket are seeking multi-billion dollar valuations.

Last week, an Ohio judge disagreed with Kalshi's stance that its right to operate as a federally-regulated prediction market supersedes state laws governing sports betting. The judge denied Kalshi’s motion for a preliminary injunction.

"History reveals no evidence that Congress intended to preempt state sports gambling laws," Chief Judge Sarah D. Morrison of the U.S. District Court for the Southern District of Ohio said in a ruling.

At the time, A Kalshi spokesperson said the company planned to challenge the ruling. "We respectfully disagree with the Court’s decision ... and will promptly seek an appeal."

Polymarket was targeted by Argentine authorities on Tuesday when a court ordered a nationwide blocking of access to the platform, citing concerns that the crypto-based prediction platform operates as an unlicensed online betting system.