Kalshi co-founder fights back against Arizona’s ‘overstep’ in what a lawyer calls a federal-state turf war

Kalshi co-founder Tarek Mansour has called Arizona’s criminal case against the company a “total overstep,” casting the move as an attack on a federally regulated exchange rather than a standard gambling enforcement action.

Mansour said the charges “have nothing to do with gambling or the merits” and argued that Arizona is trying to short-circuit a broader court fight over who controls prediction markets. Speaking to Bloomberg, he said Kalshi will continue to defend the business even as the legal battle expands.

Kalshi didn’t reply to CoinDesk’s request for comments.

Arizona Attorney General Kris Mayes filed 20 criminal counts against Kalshi this week, accusing the company of operating an illegal gambling business and offering election wagering in the state.

Her office said Arizona law bars both unlicensed wagering operations and election betting.

Kalshi lets users trade contracts tied to real-world outcomes such as elections, sports and economic data. The company says those products are event contracts overseen by the Commodity Futures Trading Commission (CFTC), which recently signaled a more supportive federal stance toward these platforms. Kalshi, along with Polymarket, accounts for the lion’s share of prediction market activity, commanding more than 90% of notional volume, according to Dune data.

In a post on social media, CFTC Chairman Mike Selig called the matter a jurisdictional dispute and said criminal prosecution was “entirely inappropriate.” He said the agency is watching closely and evaluating its options.

State officials in Arizona and elsewhere have argued that some of them look more like wagers and should fall under state gambling rules.

That split now sits at the center of a larger national fight involving various states, including New York, Tennessee, and Massachusetts. Most state actions against Kalshi so far have relied on cease-and-desist orders, injunction requests or civil claims. Arizona’s case goes further by bringing criminal charges.

“It’s not surprising at all that states would bring new tools to bear in attempting to chill the federally regulated markets,” Aaron Brogan, founder and managing attorney of Brogan Law PLLC, told CoinDesk. “Because there is a fundamental conflict between states, which regulate and draw tax revenue from state-regulated gambling markets, and these federally regulated markets that are outside of state control.”

To Brogan, the question is ultimately whether or not federal law applies, meaning at the end of the day, “ this is a dispute between the federal government and state government and that’s where it should be determined.”