Yet another state has ordered online prediction market firms to halt operations as the Arizona Department of Gaming (ADG) issued cease-and-desist letters to the likes of Kalshi, Robinhood and Crypto.com.
As first reported by InGame, in a letter to Kalshi dated May 21, Douglas Jensen – chief law enforcement officer for the ADG – made it clear that Arizona regulators deem Kalshi’s business as illegal within state lines.
As such, the department ordered Kalshi to “cease gambling operations … and desist from engaging in those activities in the future.
“Failure to do so is further evidence of your ongoing knowing and willful violation of the law.”
Kalshi could be subject to pay restitution for losses
Within the letter to Kalshi, Jensen outlined how state regulators perceive how Kalshi operates, in that the firm allows users to purchase “contracts” on future events within the world of sports.
Whether those users get paid, Jensen continued, depends on whether they correctly predict the result of that event. “This,” Jensen wrote, “amounts to Kalshi taking wagers.”
As Kalshi is not licensed by the state to do so, its operation in the Grand Canyon State is illegal.
Jensen also emphasized that state law carves out exceptions for operators to remain active, “none of which,” he added, “apply to Kalshi.”
What’s more, as Kalshi has operated illegally in the view of the Arizona Department of Gaming, it is subject to potentially award restitution for users who lost money while also forfeiting monies Kalshi has acquired.
Arizona regulators: ‘No meaningful difference’ from sports betting
Interestingly, Jensen also noted that the Arizona Department of Gaming recognizes that Kalshi is attempting to legitimize its business practice by labeling it as an “innovation” that is regulated by the federal Commodity Futures Trading Commission (CFTC).
That said, Jensen wrote, “there is no meaningful difference” between buying a contract through Kalshi and placing a bet with a state-regulated sportsbook.
On top of it all, Kalshi has not adhered to state-mandated requirements obeyed by other operators, such as background investigations, prohibiting wagers by individuals under the age of 21 and implementing integrity monitoring and problem gambling tools.
“Given the lack of licensure and compliance with Arizona statutes and regulations related to event wagering,” Jensen wrote, “online gambling as operated by Kalshi in Arizona … is illegal.”
Another state targets Kalshi, which continues to fight back
Arizona becomes the seventh state that has ordered online prediction market firms to cease operations within its jurisdiction.
It joins a list that also includes Nevada, New Jersey, Maryland, Montana, Ohio and Illinois. Other states – including Massachusetts, Pennsylvania and Michigan – have also opened investigations into the activities of Kalshi.
Yet Kalshi has remained steadfast, in fact taking Nevada, New Jersey and Maryland to court as Kalshi firmly believes it does not need to abide by state laws, noting that the CFTC oversees its practices under the Commodity Exchange Act (CEA).
In Nevada and New Jersey, judges agreed with Kalshi that the federal government owns “exclusive jurisdiction” to regulate online prediction markets. A ruling in Maryland’s case has yet to be issued.
As reported by InGame, a spokesperson for Kalshi 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.”
