Arizona accuses Kalshi of operating illegal gambling business

Authorities in Arizona have filed criminal charges against the prediction market provider Kalshi, becoming the first state in the U.S. to do so and setting up a legal battle that would get to the core of growing questions about the company’s business.

The 20-count criminal charges allege that Kalshi accepted bets from Arizona residents on a wide range of events, which prosecutors argue constitute a violation of Arizona law.

The events included professional and college sporting games, prop bets on individual player performance and political issues like whether the SAVE America Act would become law.

Included in the charges are four counts of election wagering, including bets on the 2028 presidential race, the 2026 Arizona gubernatorial race and GOP Republican primary and the 2026 Arizona Secretary of State race, according to the state’s attorney office.

“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,” Arizona Attorney General Kris Mayes said in a statement. “No company gets to decide for itself which laws to follow.”

Regulated sports wagering is legal in Arizona, but state law prohibits operating an unlicensed wagering business and separately bans betting on elections outright.

The legal challenge will be widely watched as regulators in dozens of states where wagering is permitted have raised concern over the rise of prediction markets, the operators of which argue they do not operate like sportsbooks or casinos.

President Trump’s administration has thrown its support behind the multibillion-dollar prediction market industry, further amplifying a state-versus-federal fight for regulatory control. Donald Trump Jr., the president’s eldest son, is a strategic advisor for Kalshi.

News of the lawsuit comes as more states, like Wisconsin earlier this week, are making aggressive moves to legalize sports gambling as many Americans bet billions on pro and college games each year.

This year’s NCAA men’s Basketball Tournament, which tips off this weekend, is expected to generate billions in legal wagers over the next several weeks.

The Associated Press contributed.

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