Arizona Becomes 7th State to Target Kalshi’s Event Betting
Arizona has become the 7th state to hit Kalshi and Robinhood, as well as Crypto.com, with cease and desist orders. According to the Arizona Department of Gaming, Kalshi does not have a license and its operations involving event wagering in the state are not legal. Arizona has become the latest state to issue a cease-and-desist order against Kalshi, a federally registered prediction market platform, as scrutiny intensifies over the legality of its operations - especially those involving sports-related contracts. The move makes Arizona the seventh state to take formal action against Kalshi, adding to an already complex web of legal battles and jurisdictional challenges facing the company. Arizona joins regulatory wave On May 21, the Arizona Department of Gaming issued an official cease-and-desist order to Kalshi Chief Executive Officer Tarek Mansour. In the letter, Chief Law Enforcement Officer Douglas Jensen declared that Kalshi is “not licensed” in Arizona and that its operations in the state “are illegal.” "Kalshi is taking wagers, defined under Arizona law as a sum of money or thing of value risked on an uncertain occurrence," wrote Jensen, directly challenging Kalshi’s federal positioning. Similar letters were sent to Kalshi partners Robinhood and Crypto.com, which host or facilitate similar market products. Arizona now joins a growing list of states - including New Jersey, Nevada, Montana, Maryland, Illinois, and Ohio - that have formally opposed Kalshi's activity. Meanwhile, other jurisdictions like Pennsylvania, Massachusetts, and Michigan have launched investigations but have not yet taken enforcement action. Federal vs. state: a jurisdictional tug-of-war At the core of the dispute is a fundamental legal question: who holds the regulatory reins over prediction markets that blur the lines between financial instruments and gambling? Kalshi operates under the oversight of the Commodity Futures Trading Commission as a Designated Contract Market (DCM), which it argues gives the federal government exclusive jurisdiction. In lawsuits filed in New Jersey, Nevada, and Maryland, Kalshi has sought court rulings to confirm its federal standing and block state interference. Federal judges in both Nevada and New Jersey sided with Kalshi, granting preliminary injunctions that allow it to continue operations while the legal disputes unfold. A similar motion is pending in Maryland. These wins demonstrate Kalshi’s argument that its event-based contracts fall within the regulatory framework of the Commodity Exchange Act, not state-level gaming laws. Despite these victories, Arizona's letter highlights what the state views as Kalshi’s failure to comply with important consumer protection mechanisms, such as licensing, age verification, and integrity monitoring. Kalshi responds, stresses federal oversight In a statement responding to the Arizona order, a Kalshi spokesperson said, “Kalshi remains under the exclusive jurisdiction of the CFTC. We have the utmost respect for the regulatory process and look forward to resolving the matter.” The company has consistently defended its markets as financial products rather than gambling instruments, arguing that its contracts have economic consequences and merit federal classification. Regulators push back against “innovation” label Arizona's ADG dismissed Kalshi's defense as a game designed to avoid state oversight. "There is no meaningful difference between buying one of your offered contracts and placing a bet with any other sportsbook," Jensen wrote, casting doubt on Kalshi’s characterization of its platform as “innovative.” The letter criticized Kalshi for sidestepping Arizona’s gambling laws, which include strict provisions against underage betting and require operators to undergo background checks and monitor for problem gambling. Sports markets drive majority of activity Although Kalshi initially gained attention for offering contracts on political, economic, and social outcomes, recent data show that more than 75% of its trading volume now comes from sports-related contracts. According to analysis by Daniel O’Boyle of InGame, Kalshi may now earn a larger percentage of revenue from sports markets than even FanDuel or DraftKings - two of the biggest names in US sports betting. That trend raises concerns among regulators that Kalshi’s platform functions more like an unlicensed sportsbook than a financial exchange, increasing the urgency for regulatory clarity. With no definitive timeline for compliance set by Arizona, Kalshi may opt to hold off on immediate legal action in this case. However, the accumulating cease-and-desist orders signal a growing resistance from states unwilling to concede jurisdiction over what they view as gambling activity.