Arizona on Tuesday became the first state to file criminal charges against Kalshi, accusing the prediction market company of operating an illegal gambling business within its borders, a significant escalation in the fight to regulate the popular platform.
The 20-count charging document accuses Kalshi of accepting bets on political outcomes, college sporting competitions, and individual player performance in violation of Arizona’s gambling laws. The state prohibits operating an unlicensed wagering business and bans betting on elections.
“Arizona will not be bullied into letting any company place itself above state law,” said Democratic Attorney General Kris Mayes.
The criminal case marks a new front in a high-stakes legal battle over whether prediction markets should be subject to the same rules as gambling companies.
President Donald Trump’s administration has thrown its support behind the multibillion-dollar prediction market industry, further amplifying a state-versus-federal fight for regulatory control. The outcome could have sweeping implications for how sports betting— which makes up roughly 90% of Kalshi’s trading volume— is regulated in the U.S.
Kalshi insists it’s a financial marketplace rather than a gambling operation and should only have to answer to federal regulators with the Commodity Futures Trading Commission. The agency under Trump agrees it has exclusive oversight.
Trump’s eldest son, Donald Trump Jr., is a strategic adviser for Kalshi, and the Republican president’s social media platform, Truth Social, is launching its own cryptocurrency-based prediction market called Truth Predict.
Elisabeth Diana, a spokesperson for Kalshi, dismissed the Arizona charges as “meritless” and accused the state of trying to circumvent federal court.
Kalshi has also sued several states attempting to stop anticipated actions against the platform.
At least nine other states have taken some form of legal action against Kalshi, while Utah’s Republican governor has pledged to sign a bill that could undercut the company’s viability in the state. So far, outcomes have varied, with courts issuing rulings both favoring and rejecting Kalshi’s stance.
The charges in Arizona come just days before the start of the NCAA March Madness tournaments, a peak time for prediction markets. Notably, Kalshi recently announced a $1 billion perfect bracket challenge aligned with the event while avoiding explicit mention of the NCAA.
An NCAA spokesperson expressed concerns regarding unregulated prediction markets posing threats to integrity and safety.
