Arizona became the first state to file criminal charges against prediction market company Kalshi, moving the dispute into a more aggressive posture as the March sports betting season ramps up. The state’s attorney general, Kris Mayes, said the charges reflect Arizona’s view that Kalshi cannot place itself above state law. The 20-count filing alleges Kalshi accepted wagers tied to political outcomes and to sports results ranging from college competitions to individual player performance.
Arizona’s complaint focuses on what the state says is Kalshi’s operation of an unlicensed wagering business. The state also points to Arizona’s ban on betting on elections, according to the charging document described in the case reporting. The filing marks a new front in a broader legal fight over whether prediction markets should be governed like traditional gambling operations under state law.
Kalshi has pushed back on that framing, maintaining that its product is a financial marketplace rather than a gambling operation. The company has said it should answer to federal regulators, specifically the Commodity Futures Trading Commission, and it has argued the agency has exclusive oversight. Elisabeth Diana, a Kalshi spokesperson, dismissed the Arizona charges as “meritless” and accused the state of trying to circumvent federal court.
The lawsuit and counter-litigation have played out as a state-versus-federal jurisdiction dispute. Kalshi filed suit against Arizona and also against Utah and Iowa to try to stop anticipated state action. In Arizona federal court, U.S. District Judge Michael Liburdi, a Trump appointee, denied Kalshi’s request for a temporary block and ordered the company to demonstrate why the case should be in federal court given the new state charges.
The escalation comes amid a pattern of legal action in other states and mixed early court outcomes, with states and federal courts reaching different results. Federal and state judges in Nevada and Massachusetts, respectively, issued early rulings favoring efforts to block Kalshi and Polymarket from offering sports betting in those states, and the Nevada lawsuit was remanded to state court. In contrast, federal judges in New Jersey and Tennessee ruled in favor of Kalshi, according to the reporting.
Federal regulators and political allies have weighed in on the jurisdiction question as well. CFTC chairman Michael Selig said the fight between Arizona and Kalshi is a jurisdictional issue and is “entirely inappropriate as a criminal prosecution.” The reporting also said President Donald Trump’s administration has backed the prediction market industry, amplifying the stakes of the regulatory control dispute. The case arrives as the NCAA men’s and women’s basketball tournaments near, a busy period for prediction markets and sportsbooks, with Kalshi having announced a $1 billion “perfect bracket” challenge shortly before the charges were filed.
Kalshi’s approach has centered on “Yes” or “No” contracts tied to likely outcomes of events, with pricing that typically ranges from 1 cent to 99 cents, according to the reporting. The company’s described mechanism involves customers buying and selling contracts with each other, using “swaps” rather than betting against a “house,” and Kalshi has argued that distinction is key to treating the activity as different from traditional gambling.
The NCAA’s stance also underlines the tension between prediction market activity and college sports governance. An NCAA spokesperson, Saquandra Heath, said the organization remains concerned about “unprotected prediction markets that pose a threat to competition integrity and student-athlete safety.” The Arizona charges, if allowed to proceed, could become a focal point in determining whether states can use criminal enforcement to regulate prediction market platforms during major sports events.