Kalshi is now facing criminal charges in Arizona. The company was already dealing with about 20 civil suits, but now, court documents indicate it’s being slapped with class 1 and class 2 misdemeanor charges over alleged illegal betting and wagering, and illegal “election wagering.”
The Arizona AG’s office just made the state the first jurisdiction of any kind to file criminal charges against the mind-bogglingly popular prediction market, which, according to the tracking site Kalshidata.com, sees about $30 million in trading volume per day.
Legal action against Kalshi seems to have been a simmering menace for the company, as it had filed a civil suit against Arizona along with suits against Utah and Iowa—these appear to be largely preemptive actions aimed at preventing the states from taking enforcement action against it. The Arizona filing cited “a substantial risk that the Attorney General of Arizona will bring an enforcement action against Kalshi on behalf of the Arizona Department of Gaming.”
Betting market sites like Kalshi and Polymarket allow users to bet on sports, business news, geopolitics, and war. Earlier this month, Kalshi nullified about $54 million worth of bets tied to the death by military action of Iranian leader Ayatollah Ali Khamenei, essentially cancelling all the bets related to that event, and cutting off winners from their prizes.
Kris Mayes, the attorney general of Arizona, said in a statement on Tuesday, “Kalshi is making a habit of suing states rather than following their laws,” according to NBC News. She added, “Rather than work within the legal frameworks that states like Arizona have established, Kalshi is running to federal court to try to avoid accountability.”
According to NPR, criminal convictions could result in jail time or asset forfeiture, even though company executives are not named as defendants.
Another statement from Mayes on the Arizona Attorney General’s website, says, “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.”
At the federal level, New York City-based Kalshi is legally vulnerable in ways its competitor, Polymarket, is not because while Polymarket operates from offshore, Kalshi has to submit to U.S.-based regulation from the Commodity Futures Trading Commission (CFTC).
But CFTC chairman Mike Selig has taken issue with Arizona’s charges. He posted on X Tuesday that “The Arizona Attorney General today filed criminal charges against one of our registered exchanges related to prediction markets. This is a jurisdictional dispute and entirely inappropriate as a criminal prosecution.”
He added that his agency is “watching this closely and evaluating its options.”
According to NPR, an unnamed Kalshi spokesperson called the charges “seriously flawed” and “meritless.”
Source: gizmodo.com
