The attorney general of Arizona filed 20 criminal charges against KalshiEx LLC and Kalshi Trading LLC in Maricopa County Court, accusing the company of operating an illegal gambling business and offering prohibited bets on electoral outcomes.
The lawsuit was brought by Attorney General Kris Mayes. It marks the first time a U.S. state has initiated criminal prosecution against a prediction market operator. Four of the charges target directly contracts on the 2028 presidential race, the 2026 Arizona gubernatorial election and two additional local electoral markets. The remainder involve unauthorized bets on professional and college sports. Maximum penalties reach $400,000 in fines.
Just five days earlier, Kalshi had filed a series of preemptive civil lawsuits against Arizona, Utah and Iowa, seeking to block state interventions before they materialized. Arizona wasted no time in responding.
The company argues that its approval as a Designated Contract Market by the CFTC exempts it from state regulation. CFTC Chair Michael Selig backed that position and called the criminal prosecution inappropriate, maintaining that Kalshi’s contracts qualify as “swaps” under the Commodity Exchange Act and fall under exclusive federal jurisdiction. Federal courts, however, remain divided on this point. The Third Circuit Court of Appeals is currently reviewing the New Jersey case, whose ruling could set a national standard.
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