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Arizona became the first state to file criminal charges against Kalshi for allegedly offering unlicensed sports and election betting in the state, a move that comes days after Kalshi preemptively sued Arizona over concerns it would take this exact step.
The charges against Kalshi and its trading arm, Kalshi Trading LLC, brought in state court Monday, include 20 counts, all misdemeanors. Specifically, the charges say that Kalshi unlawfully accepted wagers from Arizona residents on pro and college sporting events, prop bets on individual player performances, bets on the 2028 presidential race, and more.
This comes roughly nine months after the Arizona Department of Gaming issued a cease-and-desist order aimed at stopping Kalshi from offering sports event contracts in the state.
Regulators in other states have issued cease-and-desists, including Maryland, and Ohio, while some states have sued Kalshi—like Massachusetts and Nevada. But Arizona represents the first state to bring criminal charges.
“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 in a statement. “No company gets to decide for itself which laws to follow.”
Kalshi, which preemptively sued Mayes and other Arizona officials March 12 in federal court, issued a statement in response to the charges, saying “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 statement says. Kalshi pointed to the fact that it has received favorable early decisions in other courts, like Tennessee, which last month ruled that Kalshi is subject to federal jurisdiction. It also nodded to the support prediction markets have received from the Commodity Futures Trading Commission, the federal regulator that oversees the industry.
Kalshi said in its statement that the event contracts it offers are “different from what sportsbooks and casinos offer their customers,” and that the platform “should not be overseen by a patchwork of inconsistent state laws.”
A federal judge on Tuesday denied Kalshi’s request for a ruling that would temporarily block the gaming regulator from enforcing state betting laws, and ordered Kalshi to prove by March 20 why the court “should not abstain from this case in light of the criminal proceedings brought by the State of Arizona against Plaintiff in state court.”
Former CFTC general counsel Rob Schwartz, who now works at law firm Morgan Lewis, posted on social media that the criminal charges are “Exhibit A for not resolving this in disorderly state by state litigation.”
There are more than 20 lawsuits winding through the U.S. court system, and legal experts expect the issue of sports event contracts will eventually reach the Supreme Court. How the Supreme Court will ultimately rule is anyone’s guess, according to Schwartz.
“Anybody who tells you they know where this is going to come out is pretty much full of shit,” Schwartz said during a panel at a recent sports betting and prediction markets conference in New York. “It’s not knowable. They have no idea.”
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