Arizona became the first state to file criminal charges against Calci on Tuesday, accusing the prediction market company of running an illegal gambling business within its borders, a major escalation in the battle to regulate the popular platform.
The 20-count indictment accuses Kalci of accepting bets on political outcomes, college sports contests and the performance of individual players in violation of Arizona gambling laws. The state prohibits the operation of unlicensed betting businesses and prohibits betting on elections.
“Arizona will not be bullied into allowing any company to place itself above state law,” Democratic Attorney General Chris Mayes said.
This criminal case represents a new front in a high-stakes legal battle over whether prediction markets should be subject to the same rules as gambling companies.
The administration of President Donald Trump has She threw her support behind the multi-billion-dollar prediction market industry, further amplifying the struggle between the state and the federal government for regulatory control. The result could have sweeping implications for how to do this Sports betting — which makes up nearly 90% of Kalshi’s trading volume — is regulated in the United States
Calci insists it is a financial market, not a gambling operation, and should only have to answer to federal regulators through the Commodity Futures Trading Commission. Trump’s agency agrees it has exclusive oversight.
Trump’s eldest son, Donald Trump Jr., is a strategic advisor to Calcio. The Republican president’s social media platform, Truth Social, is launching its own cryptocurrency-based prediction market called Truth Predict.
Elizabeth Diana, Calci’s spokeswoman, dismissed Arizona’s accusations as “baseless” and accused the state of trying to circumvent the federal court.
Calci has filed a lawsuit against the states of Arizona, Utah, and Iowa in an attempt to stop expected government actions against the platform.
But U.S. District Judge Michael Liburdi in Arizona, a Trump appointee, denied Calci’s request for a temporary ban on Tuesday and ordered the company to explain why it transferred the case to federal court in light of the new state charges.
At least nine other states have taken some form of legal action against Kalci, as has the Republican governor of Utah He pledged to sign the bill Which may undermine the company’s business in the state.
So far, the results have been mixed. Federal and state judges in Nevada and Massachusetts, respectively, issued early rulings in favor of states seeking to block Calci and its competitor PolyMarket from offering sports betting in their states, while federal judges in New Jersey and Tennessee ruled in favor of Calci.
Michael Selig, head of the Commodity Futures Trading Commission (CFTC), said the legal battle between Arizona and Calci is a lawsuit and “completely inappropriate as a criminal prosecution.”
The state says Kalshi is a gambling operation that describes itself as a market. But the company says its product is different because customers participate in “swaps” between each other rather than betting against “the house.”
Kalshi works by allowing clients to buy and sell “yes” or “no” contracts linked to the likely outcome of an event. Anyone with a smartphone can bet on everything from whether it will snow in Miami to whether Trump will say a particular buzzword in his speech. Contract prices typically range between 1 cent and 99 cents, which roughly translates to the percentage of clients who believe this event will occur.
The charges were filed in Arizona just days before the start of the NCAA men’s and women’s basketball tournaments, one of the busiest periods of the year for prediction markets and sportsbooks.
Calce announced the $1 Billion Perfect Bracket Challenge on Monday without mentioning the NCAA or March Madness, a pair of NCAA trademarks. The NCAA has expressed concern about sports event contracts in prediction markets and their potential impact on its competitions.