TLDR
- Arizona became the first state to file criminal charges against prediction market platform Kalshi, accusing it of running an illegal gambling operation
- The 20-count criminal case includes charges for election wagering on the 2028 presidential race and 2026 Arizona races
- A federal judge denied Kalshi’s emergency restraining order and questioned whether his court should even hear Kalshi’s federal lawsuit
- Kalshi called the charges “seriously flawed” and “gamesmanship,” saying they were timed to dodge federal court review
- CFTC Chairman Mike Selig called the criminal charges “entirely inappropriate” and said the agency is evaluating its options
Arizona has become the first state in the country to bring criminal charges against a prediction market platform. The state filed a 20-count criminal case against Kalshi on Tuesday, accusing the company of operating an illegal gambling business.
Attorney General Kris Mayes said Kalshi was taking bets from Arizona residents on elections and sporting events in violation of state law. She said no company gets to decide which laws to follow.
The charges include four counts of election wagering. Those cover 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.
Other charges relate to bets on professional and college sports, as well as proposition bets on individual player performance. One charge involves a bet on whether the SAVE Act would become law.
Arizona can seek fines of $10,000 to $20,000 per charge. The state can also pursue asset forfeiture and court orders to shut down Kalshi’s operations.
Criminal charges also give prosecutors access to broader investigative tools. These include the power to subpoena company records and compel testimony from executives.
Kalshi’s Federal Lawsuit Hits a Wall
The criminal case came just days after Kalshi filed its own lawsuit against Arizona officials in federal court on March 12. Kalshi argued that the Commodity Exchange Act gives the CFTC exclusive authority over event contracts on regulated exchanges.
Kalshi claimed Arizona was improperly treating its contracts as illegal gambling. The company said the state’s actions since a May 2025 cease-and-desist order showed a clear threat of enforcement.
But the federal lawsuit ran into trouble almost immediately. U.S. District Judge Michael T. Liburdi denied Kalshi’s request for a temporary restraining order on the same day the criminal charges were filed.
The judge also raised the question of whether his court should step aside entirely. He ordered Kalshi to explain by March 20 why the court should not abstain from the case under the Younger abstention doctrine.
That legal principle says federal courts should generally not interfere with ongoing state criminal cases. Arizona must respond by March 27, and a hearing is set for April 3.
If the federal court abstains, Kalshi would have to fight the criminal case in Arizona state court. That outcome could encourage other states to take similar action against prediction markets.
Mixed Results Across the Country
Kalshi has faced a string of legal battles in multiple states. Last week, an Ohio federal judge denied the company a preliminary injunction, allowing the state to keep enforcing its sports-betting laws against the platform.
The company has also lost legal fights in Nevada and Massachusetts. A federal court in Maryland denied Kalshi’s request for a preliminary injunction in August 2025.
Kalshi has had some wins, though. A Tennessee federal judge ruled the company was likely to succeed in arguing its sports-event contracts are swaps regulated by the CFTC. A New Jersey federal court issued a preliminary injunction in Kalshi’s favor in April 2025.
Kalshi responded to the Arizona charges in a post on X. The company called them “seriously flawed” and accused the state of timing the filing to “circumvent federal court and short-circuit the normal judicial process.”
CFTC Chairman Mike Selig also weighed in. He called the Arizona charges “entirely inappropriate as a criminal prosecution” and said the agency is “watching this closely and evaluating its options.”
