Arizona Brings First Criminal Case Against Kalshi, Filing 20 Counts Over Alleged Illegal Gambling
Arizona has launched its first criminal action against prediction-market operator Kalshi, filing a 20-count case that accuses the company of running an unlicensed gambling business, offering illegal election wagering, and facilitating unlicensed sports betting.
Attorney General Kris Mayes said Kalshi took bets from Arizona residents in ways that violate state law. The filing cites event contracts tied to sporting events and the passage of the SAVE Act. The state also brought four counts related to election wagering, pointing to contracts tied to the 2028 U.S. presidential election and other elections.
Arizona named KalshiEx LLC and Kalshi Trading LLC as defendants, arguing that offering sports event contracts without a license breaches state gambling laws and that wagering on elections is prohibited.
Mayes said the company's branding does not change the legal reality in Arizona. "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."
The criminal filing comes days after Kalshi sued Arizona, a move the attorney general's office described as an effort to dodge accountability by taking states to federal court, citing similar preemptive actions in Iowa and Utah.
Kalshi has called the Arizona case baseless and said its event contracts are regulated by the Commodity Futures Trading Commission (CFTC) as derivatives. States have challenged that position, and federal courts have issued mixed rulings. A federal judge in Tennessee temporarily blocked state regulators from enforcing a cease-and-desist order against Kalshi. Judges in Massachusetts and Nevada have ruled that sports-related contracts remain subject to state law.
The CFTC recently issued guidance on prediction markets as it pushes to position itself as the primary regulator.
Revenue data underscores what is at stake. A Parity report estimates prediction markets generated $122 million in revenue over the last 30 days, with Kalshi accounting for $110 million. Kalshi's revenue has climbed from $1.8 million in 2023 to $24 million in 2024 and $260 million in 2025, putting it on pace to set another record this year and potentially surpass $1 billion.
Parity said Kalshi's nearest competitors lag far behind: Polymarket generated $4.2 million after introducing fees at the start of this year, while Crypto.com produced $4.1 million. Kalshi reportedly charges an average 1.2% per trade, compared with 0.01% on Polymarket.
Sports contracts drive most of Kalshi's business, with 89% of its revenue tied to those markets, a concentration that helps explain the wave of state actions.
Kalshi may also face pressure on Capitol Hill. Democratic lawmakers recently introduced legislation that would ban prediction markets based on government actions and certain predetermined outcomes, citing insider-trading concerns.
