If it looks like a duck, swims like a duck, and quacks like a duck, then it probably is a duck. If it looks like a gambling wager, sounds like a gambling wager, and pays off like a gambling wager, is it a gambling wager? So-called “prediction market” Kalshi says it isn’t. Arizona says it is, and appears willing to put its money where its (legal) mouth is.
While other states have pending civil lawsuits with prediction market platforms, Arizona became the first state to file criminal charges against one. On March 17, 2026, Arizona Attorney General Kris Mayes charged Kalshi with 20 counts of illegal sports betting and election wagering. Contending that “event contracts” are nothing more than a wagering business under a different name, Mayes accuses Kalshi of violating Arizona law governing illegal gambling operations.
A Kalshi spokesperson labeled the criminal case as “meritless” and an attempt by the state’s attorney general to circumvent federal jurisdiction. The company had filed preemptive civil suits against Arizona and two other states, but suffered a setback on the same day when a U.S. district judge denied its request for a temporary injunction and challenged Kalshi to convince him that the case should be heard in federal court rather than state court.
As this is the first time a prediction market has faced criminal prosecution for violating state gambling laws, any decision will set a precedent. While you can purchase a contract on which party the next Arizona Secretary of State will come from, predicting whether Kalshi will beat the Arizona charges is not currently available on the prediction market company’s site.
Think You Know Who the Next SCOTUS Justice Will Be? ‘Event Contracts’ Are Available.
The U.S. Supreme Court’s 2018 decision Murphy v. National Collegiate Athletic Association made sports betting more accessible to potential bettors living outside Nevada. Since that ruling, more than half of the states (and the District of Columbia and Puerto Rico) have passed state laws permitting both physical and online sportsbooks to operate within their jurisdictions.
Prediction markets like Kalshi offer “event contracts” on just about anything that can be a binary decision. It requires clear event definitions with easily verifiable outcomes. A darling of the cryptocurrency industry, they allow participants to first pick a topic, then a side. Will oil barrel prices close above $98 at the end of the day? Which baseball team will have a worse record at the end of the 2026 season, Colorado or Arizona? Where will Taylor Swift and Travis Kelce's wedding take place: New York or Rhode Island? Choose an event contract. If your prediction is right, you win part of the event’s pooled wagers. Guess wrong, and someone else is getting what you put in.
While prediction markets can be traced back as far as 1988’s Iowa Electronic Market, the 2024 U.S. Presidential Election thrust them into the limelight, with Polymarket handling over $3 billion in trading volume over the result. Most contracts are equal to or less than a dollar, but there’s no limit on how many times a contract can be purchased.
Since event contracts can be purchased for everything from final scores to player performance statistics, regulatory agencies in several states have determined that prediction markets are illegal sports gambling operations and have taken civil enforcement actions. There’s also concern that the industry is vulnerable to insider trading and market manipulation.
Event Horizon
Kalshi and other prediction markets believe they are subject to oversight under federal law and not state. Since the “swaps” are between its clients and there’s no “house” to speak of, Kalshi claims that it’s not subject to state gambling laws. Identifying itself as a “financial marketplace,” Kalshi argues that the regulation of its operation falls under the jurisdiction of the Commodity Futures Trading Commission (CFTC), with CFTC chairman Michael Selig calling Arizona’s criminal prosecution “entirely inappropriate.”
The outcome of Arizona’s charges against Kalshi remains uncertain. All are misdemeanors under state law, but convictions would carry huge legal implications for the future. If Kalshi is found guilty, it won’t be because it lacks friends in high places. President Donald Trump is allegedly planning to release his own crypto-based prediction market on his social media platform, and his son Donald serves as a “strategic adviser” for Kalshi.
Related Resources
- Federal vs. State Courts: Key Differences (FindLaw’s Legal System)
- Is it Legal To Gamble With Other People’s Money? (FindLaw’s Law and Daily Life)
- What Is Gaming Law? Understanding Casino, Online Gambling, and Sports Betting Laws (FindLaw’s Learn About the Law)
