Arizona has filed criminal charges against Kalshi, accusing it of operating an illegal 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," Arizona Attorney General Kris Mayes said in a statement. The case could ultimately head to the Supreme Court to decide whether federal oversight by the Commodity Futures Trading Commission overrides state gambling laws. Bloomberg reports: While state regulators have taken steps to crack down on what they say is unlicensed betting on Kalshi's site, Arizona appears to be the first state to escalate to criminal charges. The charges cited in the complaint are misdemeanors, which carry less serious penalties than felonies. [...] Prediction market exchanges like Kalshi have said they should continue to be regulated by the US Commodity Futures Trading Commission despite opposition from some state officials, who argue the trading should come under state gambling laws. Arizona's criminal complaint follows Kalshi's move last week to block the state's gaming department from taking enforcement action against the company. "These are the first criminal charges of any kind filed against Kalshi in any court in the United States, but it will likely be the first of several," said Daniel Wallach, a sports and gaming attorney.

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