Arizona Files Charges Against Kalshi, Calling Prediction Market an 'Illegal Gambling Operation'

In brief

• Arizona Attorney General Kris Mayes filed criminal charges against Kalshi, alleging the platform is an “illegal gambling operation.”
• The 20 criminal counts include 16 related to betting and wagering, and 4 counts regarding violations of election wagering.
• Kalshi preemptively sued the state last week, a tactic it has utilized in other states as well.

Prediction market platform Kalshi was hit with criminal charges in the state of Arizona for allegedly operating an illegal gambling service and allowing unlicensed election wagering, the state’s attorney general announced.  Arizona AG Kris Mayes filed the charges, which includes 20 criminal counts against KalshiEx LLC and Kalshi Trading LLC, the firms behind the popular prediction market platform. “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,” said Mayes in a statement. “No company gets to decide for itself which laws to follow.”

Of the 20 counts, 16 are class 1 misdemeanors related to betting and wagering, with 4 counts charging violations of election wagering, which are class 2 misdemeanors. The election wagering counts note bets on three Arizona state races in 2026, as well as the 2028 presidential election.   “Arizona law prohibits operating an unlicensed wagering business, and separately bans betting on elections outright,” the press release from the Attorney General’s office reads.  The charges dropped just days after Kalshi sued the state of Arizona, seeking relief amid the potential of "irreparable harm from [Arizona’s] threats to enforce preempted state laws.”

This maneuver, not the first of its kind from Kalshi, is something that Mayes’ office called “an attempt to avoid accountability under Arizona law.” The firm also filed a preliminary injunction against Ohio, which was recently denied by a federal court judge who said in her ruling that “the balance of equities and public interest thus cut in favor of the state.” Kalshi has since filed for an appeal. “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,” said Attorney General Mayes in a statement. “Rather than work within the legal frameworks that states like Arizona have established, Kalshi is running to federal court to try to avoid accountability.”  She concluded that her state “will not be bullied into letting any company place itself above state law.”  Earlier this month, a court ruling in Nevada increased the risk that the prediction market firm could face a restraining order in the state. It was also the subject of a class action lawsuit regarding its handling of payouts related to a market based on the former Iranian leader Ayatollah Ali Khamenei. The firm was last valued in December around $11 billion, but is reportedly seeking nearly a $20 billion valuation, according to a recent report from the Wall Street Journal.