Kalshi founder says Arizona overstepped by pressing criminal charges
Tarek Mansour, the co-founder of prediction market Kalshi, has strongly criticized criminal charges filed against the company in Arizona, describing them as an excessive and unjustified escalation of an ongoing regulatory dispute.
His comments to Bloomberg follow Arizona Attorney General Kris Mayes filing criminal charges for offering users the opportunity to wager on events in the state, including political and sporting events. Betting on the outcomes of political elections in particular is illegal in the state of Arizona.
“These charges have nothing to do with gambling or the merits. If it were about gambling or the merits, they would let the judicial process run its course in the federal courts,” Mansour said.
Prediction market platforms like Kalshi have been involved in legal disputes across the country with various state gambling regulatory bodies, but Arizona is the first state to file criminal charges against one of these platforms.
“Whatever long it takes, we’re going to fight for prediction markets,” Mansour told Bloomberg.
Kalshi and other markets claim to function as financial exchanges where users trade event-based contracts on real-life outcomes across sports, politics, culture, and more. They also argue that they are federally regulated, so individual states should not be able to legally block their operations.
On the other hand, state gambling bodies have taken umbrage with the sports markets these platforms offer, alleging that they technically amount to offering sports gambling without a license.
Charlotte Capewell brings her passion for storytelling and expertise in writing, researching, and the gambling industry to every article she writes. Her specialties include the US gambling industry, regulator legislation, igaming, and more.
Verticals:
Sectors:
Topics:
Dig Deeper
Related stories
The Backstory
Why Arizona became the flashpoint
Arizona’s criminal charges against Kalshi mark a rare escalation in a yearslong fight over where prediction markets fit in the U.S. regulatory landscape. Attorney General Kris Mayes alleged the New York-based platform illegally accepted wagers on sports, player props and elections, asserting state law governs those activities even if Kalshi styles them as financial contracts. Arizona is the first state to seek criminal penalties against the company, a notable break from the prevailing pattern of cease-and-desist letters, civil actions and regulatory warnings that have characterized other state responses. The filing contends Kalshi is running an illegal gambling operation under Arizona statutes that bar unlicensed sports betting and prohibit wagers on elections.
The charge sheet is broad by design. It places sports and political markets in a single legal bucket, sidestepping Kalshi’s argument that event contracts are federally supervised derivatives and not state-regulated gambling. Arizona’s prosecutors emphasize the state’s licensing framework for sportsbooks and explicit election betting prohibition, signaling they see little daylight between a prediction market and a wagering platform, regardless of how trades are matched or settled.
Arizona’s move did not come out of nowhere. It followed months of friction between Kalshi and state regulators over what the platform can offer and who gets to referee it. The stakes are high: if Arizona prevails, it could embolden other states to pursue criminal avenues rather than civil enforcement, reshaping the risk calculus for prediction markets nationwide.
Kalshi’s preemptive strike in federal court
Before Arizona filed charges, Kalshi sued in federal court to block the state from enforcing its gambling laws against the platform. In that complaint, the company argued the Commodity Futures Trading Commission’s oversight of its exchange preempts state regulation and asked a judge to issue a preliminary injunction. The lawsuit was triggered by a letter from the Arizona Department of Gaming warning Kalshi that only licensed operators can take sports wagers and that state law also bans bets on “any other unknown or contingent future event.” Kalshi’s position is that its event contracts function like futures, not house-banked sports bets, and therefore fall squarely under federal commodities law rather than state gambling codes. Read more on the filing and the injunction bid in Kalshi sues Arizona to block state regulators.
The clash underscores a definitional battle with real legal consequences. If a court accepts Kalshi’s futures framing, states could be limited in how they police event contracts, particularly when the products are offered via a federally designated exchange. If the court sides with Arizona, it would affirm that states can treat these markets as gambling regardless of federal registration, at least where sports and elections are concerned. Arizona’s subsequent criminal charges suggest the state is confident its statutes are clear and that federal registration does not immunize Kalshi from local prohibitions.
A growing map of state resistance
Arizona’s move lands amid a patchwork of state actions that have tested Kalshi’s expansion strategy. In Maryland, the Lottery and Gaming Control Commission ordered the company to stop operating. Kalshi sued, arguing the cease-and-desist violates federal law and seeking both preliminary and permanent injunctions on preemption grounds. The company described its sports event contracts as peer-to-peer swaps regulated by the CFTC, not wagers under state law, and cited a recent win for a temporary injunction in Nevada to support its case. Details are in Prediction markets platform Kalshi files lawsuit in Maryland.
Ohio presents a broader political fight. Kalshi filed a federal complaint after the Ohio Casino Control Commission issued a cease-and-desist and warned licensed sportsbooks that partnering with Kalshi could jeopardize their permits. The filing says those threats chilled business relationships and caused ongoing harm. Ohio maintains that only state-licensed entities can offer sports betting, reflecting a hardened stance backed by a multistate coalition of attorneys general supporting state authority over online wagering. Kalshi is seeking an injunction to keep operating while the case proceeds. See Kalshi sues Ohio in a bid to prevent being blocked from operating for the latest on that dispute.
The mixed record across states—temporary relief in some jurisdictions, firm pushback in others—has sharpened a central question: can a federally regulated event-contract exchange sell sports and political markets nationwide without state licenses, or do states retain primary jurisdiction whenever a product resembles gambling as defined locally?
The federal backdrop: election contracts and the CFTC
The federal picture grew more complicated when the CFTC dropped its appeal after a Washington, D.C., district court allowed Kalshi to list certain election contracts. The commission’s voluntary dismissal removed, at least for now, a key federal challenge to the concept of trading on political outcomes through a registered exchange. Kalshi hailed the move as historic for prediction markets. Critics warned it normalizes wagering on elections and could undermine public trust. The development is summarized in CFTC drops Kalshi election betting appeal.
That federal decision does not settle the state-law questions now roiling Arizona and other jurisdictions. States like Arizona explicitly ban betting on elections and define gambling broadly. Even if federal courts permit an exchange to list election products, states may still assert authority to prohibit their residents from participating or to penalize unlicensed activity within their borders. The CFTC’s retreat narrowed one regulatory front for Kalshi but did not close off state enforcement—civil or criminal—where statutes are clear.
What Arizona’s case signals for prediction markets
Arizona’s criminal charges extend the state-versus-federal standoff into new territory. The complaint sweeps in both sports and election products, suggesting prosecutors intend to test the outer bounds of state jurisdiction despite Kalshi’s federal registration and ongoing litigation. The outcome could set an influential marker: a conviction might prompt other states to reframe civil disputes as criminal cases, while a defeat could chill aggressive enforcement and invite more exchanges to test the model.
Kalshi’s legal posture turns on two pillars: that its markets are economically akin to futures, not wagers, and that the CFTC’s framework preempts conflicting state laws. Arizona’s case pushes back on both, zeroing in on the state’s licensing regime, consumer protections and categorical bans. Meanwhile, parallel battles in Maryland and Ohio will test how far states can go to insulate their sports betting markets and election rules from federally overseen event contracts.
For operators, investors and users, the stakes are immediate. A favorable ruling for Kalshi could accelerate the normalization of event trading across categories, from sports to politics, under a single federal umbrella. A loss could reinforce a state-by-state compliance model where election markets remain off-limits in many places and sports contracts are treated as gambling that requires local licensure. As Arizona proceeds on a criminal track while federal and other state cases unfold, the industry’s regulatory future may be decided not by one court but by the cumulative weight of split decisions across jurisdictions.
How we got here and what to watch
Kalshi’s federal suit to block Arizona enforcement laid the groundwork for today’s clash, but the state’s criminal filing widened the aperture, raising the cost of noncompliance and testing the limits of federal preemption in practice. The broader backdrop includes an evolving federal stance on election markets and a mosaic of state actions that toggle between civil remedies and hard bans. For a concise look at Arizona’s allegations and the state’s theory of the case, see Kalshi faces criminal charges for operating illegal gambling in Arizona. For the company’s jurisdictional counterargument, revisit Kalshi sues Arizona to block state regulators. For context on how other states are testing the same boundaries, read Kalshi’s Maryland lawsuit and its challenge in Ohio, and consider how the federal landscape shifted after the CFTC dropped its appeal.
Next milestones include rulings on preliminary injunctions, any federal-state preemption analysis in the Arizona case, and whether other attorneys general follow Arizona’s lead. The answers will define whether prediction markets scale as federally regulated exchanges or remain constrained by the tightest state rules in the country.
