Arizona Criminal Filing Escalates States’ War on Prediction Markets

Arizona’s filing of criminal charges against Kalshi could mark a new strategy in states’ legal battles with prediction markets, Bloomberg reported Wednesday (March 18).

Daniel Wallach, founder of Wallach Legal, told Bloomberg that Arizona’s strategy could enable the state to shut down Kalshi’s operations rather than imposing fines.

“It may reflect a fine-tuning of states’ strategies on how to attack prediction markets, by using state court civil and criminal enforcement remedies instead of the tired approach of sending cease-and-desist letters,” Wallach said.

Arizona’s legal action is the latest of more than a dozen lawsuits that have been launched against prediction markets, according to the report.

This has happened despite the fact that the federal Commodity Futures Trading Commission (CFTC) has claimed sole oversight of prediction markets, the report said.

CFTC Chairman Michael Selig said in a Tuesday (March 17) post on X, referring to Arizona’s lawsuit: “This is a jurisdictional dispute and entirely inappropriate as a criminal prosecution. The [CFTC] is watching this closely and evaluating its options.”

Massachusetts Attorney General Andrea Joy Campbell told Bloomberg: “As the federal government steps away from consumer protection, state AGs have stepped up.”

Bloomberg reported that the future of prediction markets is likely to be decided by the Supreme Court, because the number of states pursuing lawsuits will probably lead to conflicting court decisions.

Arizona Attorney General Kris Mayes announced filed criminal charges against Kalshi on Tuesday, alleging that the platform violated the state’s laws that prohibit operating an unlicensed wagering business and that ban betting 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,” Mayes said in a press release.

Kalshi told PYMNTS in an emailed statement that Arizona’s charges are meritless, and the company will fight them in court.

“Four days after Kalshi filed suit in federal court, these charges were filed to circumvent federal court and short-circuit the normal judicial process,” the company said. “They attempt to prevent federal courts from evaluating the case based on the merits — whether Kalshi is subject to exclusive federal jurisdiction.”