Kalshi now faces criminal charges in Arizona. The company was already dealing with about 20 civil lawsuits, but now, court documents indicate it is being charged with Class 1 and Class 2 misdemeanors over alleged illegal betting and betting, and illegal “election wagering.”
The Arizona AG’s office has made the state the first jurisdiction of any kind to file criminal charges against the surprisingly popular prediction market, which sees a trading volume of nearly $30 million per day, according to tracking site KalshiData.com.
Legal action against Kalshi appears to pose a serious threat to the company, as it filed lawsuits against Utah and Iowa, as well as a civil suit against Arizona – these appear to be largely preemptive actions aimed at deterring states from taking enforcement action against it. The Arizona filing states “there is a substantial risk that the Attorney General of Arizona will bring an enforcement action against Kalshi on behalf of the Arizona Gaming Department.”
Betting market sites like Kalshi and Polymarket allow users to bet on sports, business news, geopolitics and war. Earlier this month, Kalshi voided approximately $54 million in bets tied to the death by military action of Iranian leader Ayatollah Ali Khamenei, essentially voiding all bets related to that event, and cutting winners from their prizes.
“Kalashi are making a habit of suing states rather than following their laws,” Arizona Attorney General Chris Mayes said in a statement Tuesday, according to NBC News. He added, “Instead of working within the legal framework established by states like Arizona, Kalshi is running to federal court to avoid accountability.”
According to NPR, a criminal conviction could result in a prison sentence or asset forfeiture, even if company executives are not named as defendants.
Another statement from Mayes on the Arizona Attorney General’s website said, “Kalashi may brand itself as a ‘prediction market,’ but what it is really doing is running an illegal gambling operation and placing bets on Arizona elections, both of which violate Arizona law.”
At the federal level, New York City-based Kalashi is legally unprotected from the practices of its competitor, Polymarket, except that because Polymarket operates offshore, Kalashi has to submit to US-based regulation from the Commodity Futures Trading Commission (CFTC).
But CFTC Chairman Mike Selig has objected to Arizona’s charges. “The Arizona Attorney General today filed criminal charges against one of our registered exchanges related to prediction markets. This is a jurisdictional dispute and is completely inappropriate as a criminal prosecution,” he posted on Tuesday.
He said his agency is “looking at this closely and evaluating its options.”
According to NPR, an unnamed Kalshi spokesperson described the allegations as “seriously flawed” and “meritless”.
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