Arizona prosecutors have formally charged prediction market operator Kalshi with multiple criminal misdemeanors, alleging the firm unlawfully facilitated wagers on sports outcomes and political elections involving state residents.
The criminal information filed in Maricopa County Superior Court accuses KalshiEx LLC and Kalshi Trading LLC of violating state gambling and election-wagering laws across a series of transactions stretching from late 2025 through March 2026.
State officials argue the company’s event-based contracts amounted to unlicensed betting activity, including accepting stakes on football games, college basketball matchups and the outcome of political contests. The case marks the first time Arizona has pursued criminal enforcement against the federally regulated derivatives platform.
Use of predictions market platforms has escalated in recent months with geopolitics and sporting events among those that have attracted interest from consumers. One individual was reported to have gained $400K in January from making a prediction on Polymarket about the arrest of Venezuelan president Nicolás Maduro by the US.
But regulators at state and federal levels have been considering what to do to ensure adequate protection for consumers who use these platforms.
“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,” Arizona Attorney General Kris Mayes said, according to Reuters.
Some in the wealth management industry have also expressed concern about predictions market operators, especially those that also offer RIA and trading services, such as Robinhood. Recently, JPMorgan was said to be considering its policies relating to staff who use prediction markets platforms.
Arizona’s complaint against Kalshi lays out 20 counts, including Class 1 misdemeanor allegations tied to general betting activity and Class 2 misdemeanor charges related specifically to election wagering.
Among the transactions cited are wagers as small as $1 on the outcome of college basketball games and proposition bets tied to player performance or game events. In one instance, prosecutors say Kalshi accepted a $30 wager on the winner of a Washington Commanders–New York Giants matchup in December 2025.
The filing also points to alleged bets placed on whether legislation would become law and whether specific political candidates would prevail in upcoming elections. One count, for example, references a wager on whether J.D. Vance would win the 2028 US presidential election.
Additional counts relate to bets on Arizona political races, including the 2026 gubernatorial contest and the Republican primary for governor. Prosecutors also cite wagers tied to the outcome of congressional control and the state’s secretary of state election.
Kalshi has pushed back strongly against the charges, maintaining that its contracts function as financial instruments overseen at the federal level rather than as gambling products subject to state gaming laws.
“Sadly, a state can file criminal charges on paper-thin arguments,” the company said in a statement reported by Reuters, adding that its markets “should not be overseen by a patchwork of inconsistent state laws.”
Last month, the CFTC said it was the sole regulator of predictions markets by submitting an amicus curiae brief to the US Circuit Court of Appeals for the Ninth Circuit. However, a federal judge refused to offer a shield for Kalshi against a lawsuit brought by the Nevada Gaming Control Board, leaving open the ability of state regulators to continue lawsuits.
Authorities in Massachusetts, Nevada and Michigan have moved through civil channels to challenge Kalshi’s sports-related contracts and days before the criminal case was filed, Kalshi unsuccessfully sought a federal restraining order to block enforcement by Arizona officials, a development that allowed the state prosecution to move forward.
The clash underscores a growing conflict between federal oversight of derivatives markets and state control over gambling activity — a dispute that industry observers say could reshape the future of event-based trading platforms.
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