Arizona indicts prediction market Kalshi for running illegal gambling operation

Arizona’s attorney general filed criminal charges against prediction market Kalshi, accusing it of operating a gambling business without a license and offering illegal wagers on elections.

“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,” Attorney General Kris Mayes said in a statement on Tuesday.

While Arizona’s case is the first time criminal charges have been brought against the company, several other US states have alleged that Kalshi’s markets constitute illegal and unregulated sports betting.

“There’s clearly going to be a domino effect,” said Daniel Wallach, a lawyer who specializes in gaming law. “These are the first criminal charges filed against Kalshi anywhere in the US but they may not be the last.”

In a statement, Kalshi said: “Sadly, a state can file criminal charges on paper-thin arguments. States like Arizona want to individually regulate a nationwide financial exchange, and are trying every trick in the book to do it.”

Prediction market platforms such as Kalshi offer shares in binary outcomes, such as a certain team winning or losing a football match. Kalshi has argued that these contracts should continue to be regulated as derivatives by the federal Commodity Futures Trading Commission, enabling it to bypass states’ sports-gambling bans or regulations by arguing that its regulatory status under the CFTC preempts state-level laws.