Kalshi Sues Arizona in Preemptive Sports Event Contract Battle

• Kalshi has filed a lawsuit in U.S. District Court against Arizona Attorney General Kristin K. Mayes and several Arizona Department of Gaming officials
• Kalshi filed a complaint for permanent injunction and declaratory relief to keep the state from taking action against its event contracts
• The Arizona Department of Gaming previously sent Kalshi a cease-and-desist notice in May 2025

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Kalshi is taking no chances in Arizona, as the prediction market company has filed a preemptive lawsuit against the state’s attorney general and several Arizona Department of Gaming officials to stymie any potential legal action against its sports event contracts.

Kalshi filed the complaint for permanent injunction and declaratory relief in U.S. District Court for the District of Arizona against Kristin K. Mayes, Attorney General of Arizona, and several high ranking officials with the Arizona Department of Gaming, including its director Jackie Johnson.

According to counsel for Kalshi, previous actions from the Arizona Department of Gaming and the Attorney General, including a cease-and-desist letter sent to the company in May 2025, led to the decision to take preemptive legal action.

Kalshi Says Department Believes Offerings Are Illegal Gaming

Counsel for Kalshi pointed to a May 21, 2025, cease-and-desist letter sent to the prediction market company by the Arizona Department of Gaming as a clear sign the department would be taking legal action if they did not conclude their business in the state.

“The letter directed Kalshi to ‘cease gambling operations in Arizona and desist from engaging in those activities in the future’ and threatened Kalshi with criminal penalties if it did not comply. Defendants have additionally made numerous statements indicating they believe Kalshi is operating unlawfully under Arizona’s anti-gambling laws by offering event contracts. The agencies also threatened to revoke the license of any entity that partners with Kalshi anywhere in the United States,” counsel wrote.

According to Kalshi, the company attempted to contact the Arizona Attorney General to obtain written assurances of non-enforcement, but was met with silence from the office “even though the Arizona Attorney General had previously been willing to communicate with counsel and had previously assured Kalshi that defendants would not pursue an enforcement action without providing prior notice.”

An Arizona Department of Gaming spokesperson told Sports Betting Dime the “agency is aware of the lawsuit against the Department of Gaming, filed by Kalshi” but cannot comment further.

Warns Event Operators to Not Partner With Kalshi

Counsel also pointed to the Arizona Department of Gaming notifying Underdog the past December that it intended to revoke the gaming company’s fantasy sports contest operator license due to its partnership with Crypto.com and its prediction market offerings across 24 states.

In an email obtained by Sports Betting Dime through a public records request, the Arizona Department of Gaming notified Underdog on Dec. 5 of its intention to revoke the company’s fantasy sports contest operator license, classifying Crypto.com’s sports event contract offerings as “illegal gambling in Arizona.”

While the Arizona Department of Gaming has yet to make a final determination on the licensing decision, Kalshi reported the actions are a clear threat to prediction market companies and their partners offering sports event contracts in the state.

“The ADG’s message to its gaming licensees has been clear: Kalshi’s business is operating in violation of the law and if you do business with Kalshi anywhere in the country, your license is in jeopardy.”

Similar Lawsuit as Other States

Kalshi’s lawsuit against the Arizona Attorney General and Arizona Department of Gaming officials – and all of its lawsuits against state gaming commissions – revolves around the central question of who regulates sports event contracts, and prediction markets, in general.

Kalshi filed a similar preemptive lawsuit in Iowa this week after a meeting with its attorney general. Kalshi’s decision to file a lawsuit came in part after a March 4, 2026 meeting with Attorney General Bird, in which the company said it was made clear that she believes Kalshi’s prediction market offerings run afoul of Iowa state law.

Companies such as Robinhood, Kalshi, and Crypto.com believe that state regulatory bodies do not have the right to intrude on the government’s “exclusive” authority to regulate prediction market, filing lawsuits in several states to defend its practices. These companies believe the CFTC is the only regulatory body that can legally block contracts from being offered to customers.

State gaming regulators maintain the markets need to be beholden to regulations, taxes, and license fees that sports betting and gaming operators are required to follow.

The prediction market companies believe their offerings are not required to comply with state laws, as they have been preempted by the Commodity Exchange Act.