Arizona Filed Criminal Charges Against Kalshi and Polymarket, the Government Fought Back

Arizona is one of three states now facing a federal lawsuit after the Trump administration stepped in to defend two prediction market platforms that state regulators say are operating illegal gambling businesses.

The Justice Department filed suit against Arizona, Connecticut, and Illinois last Thursday, siding with New York-based companies Kalshi and Polymarket in a legal clash that has been building for months.

The two platforms allow users to buy contracts tied to the outcomes of sports games and other events. State gaming regulators argue that this makes them subject to state law. However, the companies disagree, saying they function more like derivatives markets and fall exclusively under federal oversight by the Commodity Futures Trading Commission.

Meanwhile, Arizona has been one of the most aggressive states in pursuing that fight.

Arizona's Fight

Last month, Attorney General Kris Mayes (D-AZ) took the primary step of filing criminal charges against Kalshi, the first time any state has pursued criminal action against a prediction market operator.

The 20-count criminal information alleged that Kalshi accepted wagers from Arizona residents on professional and college sports, individual player performance, and political outcomes.

This includes the 2028 presidential race, the 2026 Arizona gubernatorial contest, the 2026 Republican gubernatorial primary, and the 2026 Arizona Secretary of State race.

"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. "No company gets to decide for itself which laws to follow."

The Arizona Capitol Times reported another layer to the dispute: Kalshi had preemptively sued Arizona on March 12, 2026, to reportedly head off state accountability before charges were filed.

The broader legal landscape is tangled.

Growing Lawsuits

Kalshi alone is facing lawsuits from eight states and two tribal governments, while also suing ten state regulators in return. Including all parties, the total number of active cases has reached at least 30, not counting class action suits.

Courts have generally sided with states so far, with judges largely refusing to move cases to federal court. Nevertheless, the Trump administration has recently grown more assertive in backing the industry.

CFTC Chair Mike Selig, who initially said the matter should be left to the courts, reversed course last month and announced the agency would file a friend-of-the-court brief asserting federal jurisdiction. Donald Trump Jr., an adviser to both Kalshi and Polymarket, has long supported the platforms.

Illinois Gov. JB Pritzker's office accused the administration of protecting companies engaged in insider trading. Connecticut Attorney General William Tong said federal lawyers were recycling legal arguments that courts had already rejected.

For Arizona, the federal lawsuit is a direct challenge to the state's authority to enforce its own gambling laws. The state now finds itself fighting on two fronts, defending against the Trump administration's suit while pressing its criminal case against Kalshi.

Currently, Mayes has shown no sign of backing down.