Kalshi Faces Criminal Charges from Arizona Attorney General Over Gambling Allegations
Criminal charges have been filed against Kalshi by Arizona's Attorney General, with the prediction market platform claiming the state is attempting to override federal regulatory authority.
Kris Mayes, the Attorney General of Arizona, revealed that her office has brought forward criminal charges relating to gambling against the corporate entities operating the Kalshi prediction markets platform.
Mayes disclosed in a notice released on Tuesday that the charges claim Kalshi has been running an "illegal gambling business in Arizona without a license" and has been facilitating election wagering, actions that violate state regulations. The allegations from Arizona authorities contend that the Kalshi prediction markets platform enabled residents of the state to place wagers on event contracts concerning sports as well as elections at both state and federal levels.
"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. No company gets to decide for itself which laws to follow."
— Kris Mayes, Arizona Attorney General
The Attorney General's office indicated that these charges came after Kalshi initiated its own legal action against multiple US states "preemptively in an attempt to avoid accountability under Arizona law." Authorities at the state level have brought similar legal challenges against companies operating prediction market platforms such as Polymarket and Kalshi.
"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. As other courts have recognized and the CFTC affirms, Kalshi is subject to federal jurisdiction. 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 spokesperson
During the previous week, a judge in Ohio rejected Kalshi's petition for a preliminary injunction in a comparable case brought against state authorities, determining that the company had not demonstrated that the sports event contracts offered on the platform fell under the "exclusive jurisdiction" of the Commodity Futures Trading Commission (CFTC). Nonetheless, during February, a federal judge presiding in Tennessee issued a block preventing state authorities from applying gambling laws against Kalshi.
CFTC chair backs "exclusive authority" over prediction markets
Currently serving as the sole commissioner on the CFTC following acting chair Caroline Pham's resignation in December, Chair Michael Selig has stated publicly that the federal regulatory body would stand behind prediction market platforms facing state-level legal challenges.
During the previous week, Selig initiated public comment on a proposed rule regarding how the Commodity Exchange Act would be applicable to prediction markets, which could potentially transform the agency's approach to both regulation and enforcement going forward.