Arizona Attorney General Kris Mayes filed criminal charges on March 16, 2026, against prediction market platform Kalshi, accusing the company of operating an illegal gambling business without a license and unlawfully accepting bets on state and federal elections.
The 20-count criminal information, filed in Maricopa County Superior Court, includes four counts of election wagering—a Class 2 misdemeanor—and 16 counts of illegal betting and wagering—Class 1 misdemeanors—covering bets placed between December 2025 and March 2026 on professional and college sports, player performance propositions, and political outcomes including the 2028 presidential race and multiple 2026 Arizona elections.
The charges represent the first criminal prosecution against Kalshi in the United States and escalate the ongoing legal battle between the federally regulated exchange and approximately a dozen states that have sought to shut down its operations under local gambling laws.
Charges and Alleged Violations
Election Wagering Counts
The criminal information specifically alleges that Kalshi accepted bets on four political races in violation of Arizona’s blanket prohibition on election wagering:
2028 U.S. presidential race: Including a specific $2 wager on whether JD Vance would win the presidency
2026 Arizona gubernatorial race
2026 Arizona Republican gubernatorial primary
2026 Arizona Secretary of State race
Sports Betting Allegations
The remaining 16 counts allege Kalshi operated an unlicensed sports wagering business, accepting bets as small as $1 on outcomes including:
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NFL and NBA games
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College basketball matchups
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Super Bowl propositions
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Individual player performance bets (e.g., Phoenix Suns player Devin Booker scoring over 20 points against the San Antonio Spurs on February 19)
Legal Status of Allegations
All 20 charges are misdemeanors rather than felonies, carrying potential fines between $10,000 and $20,000 per violation. The charges do not seek immediate injunctive relief to shut down Kalshi’s operations in Arizona, focusing instead on criminal penalties.
Kalshi’s Response and Federal Preemption Argument
Company Statement
A Kalshi spokesperson rejected the charges, stating: “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.” The company characterized the prosecution as “seriously flawed” and “gamesmanship” intended to bypass its federal lawsuit against the state.
Federal Jurisdiction Claim
Kalshi maintains that its status as a Designated Contract Market (DCM) regulated by the Commodity Futures Trading Commission (CFTC) grants it exclusive federal jurisdiction that preempts state gambling laws. The company argues that its event contracts are financial derivatives rather than gambling products, distinguishing them from traditional sportsbook offerings.
“As other courts have recognized and the CFTC affirms, Kalshi is subject to federal jurisdiction. It’s different from what sportsbooks and casinos offer their customers, and it should not be overseen by a patchwork of inconsistent state laws,” the company stated.
Preemptive Lawsuit and Procedural Context
March 12 Federal Filing
The criminal charges follow Kalshi’s preemptive lawsuit filed in Arizona federal court on March 12, 2026—four days before the state’s criminal filing—seeking to block Arizona from enforcing its gambling laws against the platform. The complaint followed a cease-and-desist letter from the Arizona Department of Gaming and argues that federal law preempts state regulation under the Supremacy Clause of the U.S. Constitution.
Attorney General’s Response
Attorney General Mayes criticized Kalshi’s legal strategy: “Kalshi is making a habit of suing states rather than following their laws. In the last three weeks alone, the company has filed lawsuits against Iowa and Utah, and now Arizona. Rather than work within the legal frameworks that states like Arizona have established, Kalshi is running to federal court to try to avoid accountability.”
Mayes added: “Arizona will not be bullied into letting any company place itself above state law.”
Federal vs. State Jurisdiction Conflict
Inconsistent Court Rulings
Kalshi faces conflicting outcomes in its nationwide legal battles:
Courts ruling against Kalshi:
Ohio: Federal judge denied Kalshi’s request for a preliminary injunction, finding that “Kalshi’s concerns were dwarfed by Ohio’s interest in exercising its police power”
Nevada: Federal court ruled against Kalshi
Massachusetts: Superior Court allowed preliminary injunction against Kalshi’s sports-related contracts, rejecting federal preemption arguments and emphasizing states’ historic authority over gambling regulation
Courts ruling in Kalshi’s favor:
Tennessee: Federal judge blocked state authorities from enforcing gambling laws against Kalshi
New Jersey: Federal court granted preliminary injunction protecting Kalshi
CFTC Chairman’s Position
CFTC Chairman Michael Selig has publicly supported prediction market platforms, asserting that the agency has “exclusive jurisdiction” over them and that state-level enforcement is “entirely inappropriate as a criminal prosecution.” In March 2026, Selig opened a proposed rule for public comment on how the Commodity Exchange Act should apply to prediction markets, potentially signaling future regulatory changes.
Broader Legal Implications
Supreme Court Likely
Legal observers anticipate that the jurisdictional conflict will ultimately require Supreme Court resolution. Aaron Brogan, a lawyer focusing on alternative financial assets, stated that the Arizona criminal charges “only deepens the need for a federal appellate court, and ultimately the Supreme Court, to decide whether or not federal law preempts states’ enforcement of gambling laws.”
Daniel Wallach, a sports and gaming attorney, noted that if some exchanges face criminal sanctions, “certain of the executives or certain of these exchanges stop operating in some states.”
Massachusetts Precedent
A January 2026 Massachusetts Superior Court ruling against Kalshi established important precedent, finding that the state’s licensing regime does not frustrate federal objectives and operates alongside them. The court emphasized that the CFTC’s own rules preserve state laws addressing gaming or wagering, reinforcing that federal oversight of derivatives was not meant to legalize sports betting activity by default.
Frequently Asked Questions
What specific charges has Arizona filed against Kalshi?
Arizona filed 20 criminal misdemeanor counts against Kalshi: four counts of election wagering (Class 2 misdemeanor) for bets on the 2028 presidential race, 2026 Arizona gubernatorial race, 2026 Arizona Republican gubernatorial primary, and 2026 Arizona Secretary of State race; and 16 counts of illegal betting and wagering (Class 1 misdemeanor) for accepting bets on professional and college sports, player performance propositions, and political event contracts.
Why does Kalshi argue it should be exempt from state gambling laws?
Kalshi contends that its status as a Designated Contract Market (DCM) regulated by the Commodity Futures Trading Commission (CFTC) grants it exclusive federal jurisdiction under the Commodity Exchange Act, which preempts state gambling laws. The company maintains its event contracts are financial derivatives rather than gambling products, and that a “patchwork of inconsistent state laws” should not govern a nationwide financial exchange.
What is at stake in this legal battle for the prediction market industry?
The Arizona prosecution represents the first criminal charges against a prediction market platform in the U.S. and could set precedent for whether these platforms operate under exclusive federal oversight or must comply with state gambling laws. With conflicting federal court rulings across multiple states and the CFTC asserting jurisdiction, legal experts anticipate the dispute will ultimately reach the U.S. Supreme Court. Adverse outcomes could force platforms to withdraw from certain states or subject executives to criminal liability.
