TLDR
- Arizona filed 20 criminal counts against Kalshi, accusing it of running an illegal gambling business without a license.
- Kalshi co-founder Tarek Mansour called the charges a “total overstep,” saying they are not about gambling.
- The CFTC, which oversees Kalshi, said criminal prosecution is “entirely inappropriate” in this case.
- Courts have given mixed rulings — Ohio denied an injunction for Kalshi, while Tennessee blocked state enforcement.
- Several other states, including New York, Massachusetts, and Tennessee, are also taking action against Kalshi.
Prediction markets platform Kalshi is facing a major legal fight after Arizona filed 20 criminal counts against the company this week. Arizona Attorney General Kris Mayes accused Kalshi of running an illegal gambling operation without a license and offering election wagering in the state.
JUST IN: Kalshi CEO Tarek Mansour slams “baseless” Arizona lawsuit over claims that betting on “a contingent future event” is illegal, vowing to fight for 400,000 users in the state. pic.twitter.com/IVoCNaQRMO
— Whale Insider (@WhaleInsider) March 18, 2026
Kalshi co-founder and CEO Tarek Mansour responded quickly. In a Bloomberg interview, he called the charges a “total overstep” and said they had “nothing to do with gambling.” He accused Arizona of trying to get around a separate lawsuit Kalshi had already filed against state authorities.
Kalshi lets users trade contracts tied to real-world events like elections, sports results, and economic data. The company argues these are event contracts, not gambling products, and that they fall under federal oversight by the Commodity Futures Trading Commission (CFTC).
The CFTC, now under Chairman Michael Selig — appointed by President Trump — has signaled support for prediction markets. Selig responded to the Arizona charges in a post on social media, calling the situation a “jurisdictional dispute” and saying criminal prosecution was “entirely inappropriate.” He added that the CFTC is watching closely and reviewing its options.
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. The @CFTC is watching this closely and evaluating its options.
— Mike Selig (@ChairmanSelig) March 17, 2026
A Growing Legal Battle Across States
Arizona is not the only state pushing back. New York, Tennessee, and Massachusetts have all taken some form of action against Kalshi. Most of these have involved cease-and-desist orders, civil claims, or injunction requests. Arizona’s move to bring criminal charges goes further than any other state so far.
Legal expert Aaron Brogan, founder of Brogan Law, told CoinDesk the situation reflects a deeper conflict. He said states that regulate and tax gambling have a financial reason to challenge federally regulated prediction markets, which operate outside their control.
“This is a dispute between the federal government and state government and that’s where it should be determined,” Brogan said.
Court decisions so far have gone both ways. A Tennessee court blocked state authorities from enforcing gambling laws against Kalshi in February. But an Ohio judge last week denied a preliminary injunction based on Kalshi’s argument that CFTC jurisdiction should apply.
Who Controls Prediction Markets?
The central question is whether federal law overrides state gambling rules when it comes to platforms like Kalshi. Kalshi argues the CFTC has full and exclusive authority over its products. Arizona says state law still applies.
Kalshi and rival platform Polymarket together control more than 90% of prediction market activity by notional volume, according to data from analytics platform Dune. The outcome of the legal battle could affect the entire industry.
Mansour said Kalshi will continue to fight the charges and will “abide by court decisions.” He also suggested the Arizona case was partly driven by political bias and media attention, not legal merit.
The next step in the case will likely play out in court, where the question of federal versus state authority will need to be resolved.
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