Kalshi faces criminal charges in Arizona in prediction markets fight
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Kalshi offers a variety of prediction markets. Photo: Nikolas Kokovlis/NurPhoto via Getty Images
Arizona's attorney general filed criminal charges against Kalshi on Tuesday in a dramatic escalation of the legal battle over prediction markets.
Why it matters: Kalshi allows users in all 50 states to risk money on event contracts — including what it calls "100% legal sports trading" — but detractors say it usurps state gambling regulations.
Driving the news: Arizona AG Kris Mayes, a Democrat, hit Kalshi with 20 counts, including charges for operating an illegal gambling business and providing election wagering.
- "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 statement. "No company gets to decide for itself which laws to follow."
The other side: Kalshi blasted the AG's "paper-thin arguments," arguing that it's properly regulated by the U.S. Commodity Futures Trading Commission.
- "It's different from what sportsbooks and casinos offer their customers, and it should not be overseen by a patchwork of inconsistent state laws," Kalshi said Tuesday in a statement.
- Kalshi CEO Tarek Mansour argued in an interview with Axios last year that prediction markets are not gambling.
Context: Kalshi has faced legal opposition from a number of other states, but this marks the first time it's faced criminal charges.
- It also comes after Kalshi preemptively sued Arizona last week.
Zoom in: The criminal charges accuse Kalshi of:
- Accepting bets from Arizona residents.
- Allowing users to bet on politics.
- Operating an unlicensed wagering business.
What we're watching: Whether the CFTC intervenes in the case in support of Kalshi.
- The CFTC's new chair, Mike Selig, recently appointed by President Trump, has been supportive of prediction markets and threatened to fight states that challenge the commission's regulatory turf.
- "To those who seek to challenge our authority in this space, let me be clear — we will see you in court," Selig said in February.
- Selig did not immediately respond to a request for comment on Tuesday.
Reality check: Experts say the dispute over the legality of prediction markets has a good chance of making its way to the Supreme Court.
