Arizona going to the mattresses
The state of Arizona has ratcheted up the legal battle against prediction market companies. On Tuesday, Arizona Attorney General Kris Mayes filed criminal charges against Kalshi for allegedly operating an unlicensed gambling business.
“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,” Mayes said in a statement. “No company gets to decide for itself which laws to follow.”
Mayes also charged Kalshi with four counts of election wagering, which is against the law in the state.
States and prediction market companies like Kalshi and Polymarket have been going at each other in the past year as prediction markets have skyrocketed in popularity. Gambling is, by and large, regulated on a state level, but prediction markets claim that they are not gambling. This difference in opinion between the companies and states has caused friction, as the states not only believe that if prediction markets want to operate, they should be regulated, but the lack of regulation also means that states are losing out on taxes and fees.
Federal government on Kalshi’s side?
To this point, though, legal tussles have been in the form of lawsuits, not criminal charges. Kalshi itself sued Arizona last week to prevent the charges that were just brought today.
“Kalshi is making a habit of suing states rather than following their laws,” Mayes said. “In the last three weeks alone, the company has filed lawsuits against Iowa and Utah, and now Arizona.”
In the meantime, prediction markets may have the weight of the federal government behind them. In January, the US Commodity Futures Trading Commission (CFTC) announced that it will write up rules for prediction markets and provide its own guidance on legal matters, a change from its previous practice of leaving regulation to the states and legal opinions to the courts.
California Governor Gavin Newsom spoke out against the CFTC’s turn, pointing out that Donald Trump Jr., the President’s son, is on Polymarket’s Board of Directors and has a sizeable investment in the company, and is also an advisor to Kalshi. Newsom opined that Trump, Jr.’s connection to prediction markets and the CFTC’s support of them is not likely to be coincidence.
