The Attorney General of Arizona filed criminal charges against forecast market Kalshi, accusing him of operating an unlicensed gambling business and offering illegal bets on elections.
“Kalashi may brand itself as a ‘prediction market,’ but it is actually running an illegal gambling operation and placing bets on Arizona elections, both of which violate Arizona law,” Attorney General Chris Mayes said in a statement Tuesday.
While the Arizona case is the first time criminal charges have been brought against the company, several other US states have alleged that Kalushi’s markets contain illegal and unregulated sports betting.
“There’s obviously going to be a domino effect,” said Daniel Wallach, a lawyer who specializes in gaming law. “These are the first criminal charges filed against Kalshi anywhere in the United States, but they may not be the last.”
In a statement, Kalshi said: “Unfortunately, a state can file criminal charges based on paper arguments. States like Arizona want to individually regulate financial exchange nationwide, and are trying every trick in the book to do so.”
Prediction market platforms like Kalshi offer shares in binary outcomes, such as whether a certain team wins or loses a football match. Kalshi has argued that these contracts should be regulated as derivatives by the federal Commodity Futures Trading Commission, allowing it to bypass states’ sports-gambling restrictions or regulations by arguing that its regulatory status under the CFTC preempts state-level laws.
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