Arizona Files Criminal Lawsuit Against Kalshi

Key Insights

• Arizona files 20 counts lawsuit in the first criminal action against Kalshi.
• The state says the prediction platform is offering illegal election wagering and unlicensed sports betting.
• Kalshi is the prediction platform with the most revenue, pulling $110 million in the last 30 days

The state of Arizona has filed a criminal action against prediction market leader Kalshi. In a 20-count lawsuit, the state attorney general, Kris Mayes, charged Kalshi for operating an unlicensed gambling business and offering illegal election betting.

The lawsuit marks the first time a criminal action has been brought against Kalshi, even as it is currently facing multiple civil lawsuits.

Arizona Claims Kalshi Operations Violate State Laws

According to the official statement, Kalshi accepted bets from Arizona residents that violated state law. These include contracts for various sports events and the passage of the SAVE Act.

There were also four counts of election wagering, with that state noting bets on the 2028 presidential election and other state elections.

Arizona claimed that offering event contracts on sports without a licence is a violation of the state law. It added that the wagering on elections is also banned within the state, naming both KalshiEx LLC and Kalshi Trading LLC as defendants.

Speaking on the lawsuit, Mayes said what Kalshi does is illegal.

She said:

“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.”

Interestingly, the lawsuit comes a few days after Kalshi filed suit against Arizona. The Attorney General’s statement noted this, calling it an attempt by the firm to avoid accountability by suing states in federal court.

It cited similar preemptive lawsuits in Iowa and Utah. However, Mayes added that despite Kalshi’s efforts, the state will not allow any company to operate above the state law.

Meanwhile, Kalshi has criticised the Arizona lawsuit as baseless, noting that it is based on paper-thin arguments. The platform has been insisting that its event contracts are regulated by the Commodity Futures Trading Commission (CFTC) as derivatives.

However, several states have been pushing back on that, leading to diverse rulings from federal courts on the subject. A federal judge in Tennessee temporarily sided with Kalshi, preventing state regulators from enforcing a cease-and-desist order against the platform.

Still, federal judges in Massachusetts and Nevada have ruled that sports-related contracts are subject to state laws. The CFTC recently issued guidance on prediction markets as it seeks to become the sole regulator.

Kalshi Dominates Revenue for Prediction Markets

Meanwhile, the fight over who should regulate prediction markets might be less about users and more about the money involved. A new report by Parity shows that the prediction market generated $122 million in revenue over the last 30 days, with Kalshi responsible for $110 million of that.

The company has generated the most revenue among all prediction market platforms, reaching $1.8 million in 2023, $24 million in 2024, and $260 million in 2025. This means it will likely break its revenue record this year and could pass $1 billion.

Its closest competitor, Polymarket, only made $4.2 million after it began charging fees at the start of this year. Crypto.com also made $4.1 million. Kalshi reportedly charges an average of 1.2% per trade, while Polymarket charges 0.01%.

Interestingly, 89% of Kalshi’s revenue comes from sports contracts, which explains why many states are suing the company. However, the company might also have to worry about regulatory efforts in Congress. Democratic lawmakers recently introduced a bill to ban prediction markets based on government actions and certain predetermined outcomes over concerns about insider trading.

The post Arizona Files Criminal Lawsuit Against Kalshi appeared first on The Market Periodical.