Arizona’s attorney general Kris Mayes has initiated criminal proceedings against the prediction market platform Kalshi, alleging that it operates an unlicensed gambling business in the state and engages in election wagering.

The 20-count lawsuit, submitted to Maricopa County court on Tuesday, accuses the firm of partaking in unauthorized gambling operations, asserting that the platform “received bets from Arizona residents on a diverse range of events,” including state elections, an action deemed illegal in Arizona. The lawsuit charged Kalshi with four instances of election wagering for accepting bets from Arizona residents regarding the 2028 presidential election, the 2026 Arizona gubernatorial election, the 2026 Arizona Republican gubernatorial primary, and the 2026 Arizona secretary of state race.

According to the AZ Mirror, this marks the first occasion a state has pursued such legal actions against the company, indicating a significant intensification in the conflict between states and the prediction market sector.

“Kalshi might position itself as a ‘prediction market,’ but in reality, it is operating an illegal gambling operation and placing bets on Arizona elections, both of which breach Arizona law,” Attorney General Mayes stated in an announcement. “No entity has the authority to unilaterally select which laws to adhere to.”

It’s notable that the accusations are technically misdemeanors. They follow a slight increase in cease-and-desist notifications, lawsuits, and various official actions from states concerning Kalshi’s operations, with several officials expressing that the company is evading state gambling regulations.

On the other hand, prediction platforms like Kalshi contend that they are not violating state legislation, as they are overseen by federal regulation through the Commodity Futures Trading Commission.

While Kalshi faces substantial criticism from multiple angles, the company has also pursued its own, often preemptive, legal measures.

Kalshi filed a lawsuit against Arizona’s Department of Gaming in federal court on March 12. The company’s action argued that Arizona’s regulatory measures were infringing “upon the federal government’s exclusive power to regulate derivatives trading on exchanges.” Kalshi has also recently launched lawsuits against Iowa and Utah on similar grounds.

Mayes’ office contends that the company is simply attempting to evade responsibility.

“Kalshi has developed a pattern of litigating against states instead of complying with their regulations. Just in the last three weeks, the company has brought lawsuits against Iowa and Utah, and now Arizona,” Mayes stated in an announcement. “Instead of operating within the legal frameworks set by states like Arizona, Kalshi is rushing to federal court to evade accountability.”

Elisabeth Diana, Kalshi’s communications chief, described the Arizona criminal allegations as “seriously flawed” and as an example of “gamesmanship” tied to the company’s own legal actions against the state.

“Four days after Kalshi initiated its lawsuit in federal court, these claims were made to bypass federal court and disrupt the standard judicial process,” Diana stated. “They aim to obstruct federal courts from assessing the case based on its merits — whether Kalshi falls under exclusive federal jurisdiction. These charges are baseless, and we are prepared to contest them in court.”

Federal authorities have indicated their support for the prediction industry, setting the stage for a potential regulatory conflict between states and the federal government. Michael Selig, chair of the Commodity Futures Trading Commission, recently wrote an op-ed in the Wall Street Journal accusing state governments of “launching legal assaults on the CFTC’s authority to regulate” such platforms. Selig also asserted that his agency would no longer “remain passive while overly aggressive state governments” undermined the agency’s “exclusive jurisdiction” over the industry.