The stage has been set for a showdown between federal and state authorities which could decide the future of prediction platforms in the US and elsewhere.

This week, Arizona became the first state to file criminal charges against Kalshi, one of the two largest prediction markets in the US and globally alongside Polymarket. The charges were filed by the state Attorney General and the Arizona Department of Gaming (ADG).

Disputes between state Gambling Commissions and the prediction platforms are nothing new, but this is different. This has gone beyond a dispute over whether predictions fall under the jurisdiction of state regulators or federal ones to an actual criminal case.

Filed by Arizona Attorney General Kristin Mayes, the suit charges Kalshi with 16 counts of offering betting and wagering in the state, and four counts of offering election wagering – the latter an illegal practice in general throughout the US.

The Arizona Attorney General’s Office cites examples of Kalshi accepting ‘bets’ on a range of events including professional and college sports events. 

Other charges relate to bets on whether the SAVE Act – a proposed federal law that would require documentary proof of US citizenship to vote – would be passed, and bets on the 2026 Arizona gubernatorial (governor) election, the 2026 Arizona Republican gubernatorial primary, and the 2026 Arizona Secretary of State election.

Of note, Kalshi uses the terms ‘predictions’ or ‘event contracts’ instead of bets, and prediction platforms are regulated not as betting platforms, but as financial instruments.

In a press release, Mayes said: “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. 

“No company gets to decide for itself which laws to follow.”

Kalshi’s case

Kalshi and Arizona’s spat is also nothing new. Jackie Johnson, Director of the ADF, sent cease-and-desist orders to both Kalshi and Crypto.com, the latter of which runs a predictions market via Kalshi’s platform, in May 2025.

The regular accused the duo’s events contracts of essentially being unlicensed betting. Last week, Kalshi filed its own federal court complaint seeking a permanent injunction against Arizona’s cease-and-desist order.

Kalshi has been quick to respond to the Arizona criminal charges. In a statement sent to SBC Americas yesterday, the firm’s Head of Communications, Elisabeth Diana, remarked that ‘sadly, a state can file criminal charges on paper-thin arguments’.

“States like Arizona want to individually regulate a nationwide financial exchange, and are trying every trick in the book to do it,” she added.

“As other courts have recognized and the CFTC affirms, Kalshi is subject to federal jurisdiction. It’s different from what sportsbooks and casinos offer their customers, and it should not be overseen by a patchwork of inconsistent state laws.”

State gambling commissions have routinely argued that Kalshi, Polymarket and others fall under their jurisdiction as gambling platforms. This has been the main crux of the legal argument around predictions for years, until this week’s criminal charges.

Kalshi has found itself in litigation with several states over the past couple of years – the firm had already filed lawsuits against Utah and Iowa regulators’ attempts to block the platform, as well as Arizona.

Predictions providers argue back that their products are a form of financial services, akin to trading and speculating on commodities. This would place them under the jurisdiction of the federal Commodities Futures Trading Commission (CFTC).

Arizona marks escalation

The stance of the CFTC regarding predictions has changed somewhat over the past year. Under the presidency of Joe Biden, the CFTC had a much more sceptical, even confrontational view, of predictions. Under Donald Trump, it has moved to firmly being in the platforms’ camp.

Michael Selig, Chair of the CFTC, has gone from an attitude of ‘follow what judicial decisions tell me to follow’ to actively backing the predictions. Last month he said that anyone who challenges the CFTC’s authority over predictions will see the regulator in court.

He may now make good on his promise. In a post on X yesterday, Selig wrote: “The Arizona Attorney General today filed criminal charges against one of our registered exchanges related to prediction markets. 

“This is a jurisdictional dispute and entirely inappropriate as a criminal prosecution. The CFTC is watching this closely and evaluating its options.”

The Arizona Attorney General today filed criminal charges against one of our registered exchanges related to prediction markets. This is a jurisdictional dispute and entirely inappropriate as a criminal prosecution. The @CFTC is watching this closely and evaluating its options.

— Mike Selig (@ChairmanSelig) March 17, 2026

Not just the CFTC, but everyone, should be watching this Arizona legal case closely, including stakeholders in betting and gaming – in fact, especially stakeholders in betting and gaming, on both sides of the Atlantic.

Predictions platforms have proven disruptive in the US, and the regulated industry has responded either with fierce opposition as in the case of the American Gaming Association (AGA), or by joining in on the trend in the case of DraftKings, Flutter Entertainment’s FanDuel, and others.

During Flutter’s recent FY25 earnings call, predictions were one of the biggest talking points for investors and analysts. Other gaming firms have also been keen to get involved in the space, like the UK’s Matchbook, which announced its own predictions platform in December. 

Beginning of the end?

The Arizona case could spill over to affect bookmakers as well as predictions. 

In September, Johnson warned licensed Arizona gaming firms that offering event contracts without a licence could put their licences at risk – perhaps having taken note of growing interest in predictions from the likes FanDuel and DraftKings at that time.

It could also have international consequences, not just for Europe-founded firms like Flutter and Matchbook. Regulators in Europe may celebrate a hypothetical Arizona victory in the case, with the likes of France, the Netherlands, Portugal and Romania, to name a few, having been clamping down on the markets.

Such a victory would probably also be celebrated by some traditional betting stakeholders, particularly those with an interest in betting exchanges. 

Many in Europe see predictions as effectively being a repackaged betting exchange with more political markets, as alluded to by Smarkets CEO Jason Trost in an SBC News interview.

It’s too early yet to say whether this will be the end of predictions – neither side has even had their day in court yet. 

But this is the most significant legal challenge the platforms have faced so far, and the coming clash between the state and federal perspective could redefine US regulation of both betting and predictions for years to come.

However, with Kalshi having claimed over $100m in trading volume around the 98th Academy Awards alone, even if the Arizona case does somehow lead to an end to the predictions party – they’ve certainly made a ton of money while it lasted.