Kalshi has continued its flurry of lawsuits against state gaming regulators, suing Arizona Department of Gaming (ADG) Director Jackie Johnson and state Attorney General Kristin Mayes in federal court.
In the complaint filed on Thursday in the U.S. District Court for the District of Arizona, legal counsel for Kalshi claims there is a “substantial risk” that Mayes will seek to bring an enforcement action against Kalshi on behalf of the ADG with the intent to prevent the company from offering event contracts in the state.
The lawsuit is the third that Kalshi has brought against a state in the space of less than three weeks. It filed complaints in Utah in late February and in Iowa earlier this week as it tries to get out in front of measures it believes state authorities may take to try to halt its prediction markets business.
Arizona is the 13th state in which some form of prediction markets lawsuit has been filed by either state officials or by a platform offering sports event contracts.
Arizona regulator sent C&D 10 months ago
In the cases of Utah and Iowa, Kalshi made the first move by suing in federal court before gaming regulators had taken any action such as a cease-and-desist letter.
The ADG has already pursued that course of action, sending a C&D to both Kalshi and Crypto.com last May. In those notices, the gaming regulator asserted that the companies were offering unlicensed event wagering in contravention of state law.
While the agency stated in those letters that Kalshi had made an “attempt to legitimize its conduct” by labeling it as “innovation” and “sports event trading” under the federal oversight of the Commodity Futures Trading Commission (CFTC), it argued “there is no meaningful difference” between the sports event contracts that Kalshi offers and the sports wagering that the ADG regulates at the state level and requires companies to seek licenses to provide.
Kalshi’s representatives stated in the filing that the C&D, filed 10 months ago, was a clear sign that the department would be taking legal action if they did not shut up shop in the Grand Canyon State.
Arizona’s multiple prediction markets warnings
The ADG’s Johnson has been one of the more vocal state gaming regulators about the threat she believes prediction markets pose.
Last June, weeks after sending the C&Ds, she wrote a letter to the CFTC in which she equated sports contracts to “illegal” sports betting and stated that when Arizonans voted to legalize sports wagering, they did not intend for a federally overseen alternative to become available.
Three months later, she sent a notice to licensed sportsbooks in the state warning them that offering event contracts without a license violates state law and could put their state wagering licenses in jeopardy. Johnson stressed in that letter that licensees would be scrutinized for involvement with prediction markets regardless of whether the activity happened in Arizona or elsewhere in the U.S.
Arizona chased Underdog
Then, in December, Arizona Office of the Governor Senior Policy Advisor Chris Kotterman confirmed at the National Council of Legislators from Gaming States (NCLGS) Winter Meeting in Puerto Rico that ADG Director Johnson had issued a notice of violation and intention to revoke the daily fantasy sports (DFS) license of Underdog.
Underdog has offered sports event contracts via a partnership with Crypto.com since September 2025. Kotterman explained that the ADG targeted Underdog because of its decision to work with Crypto.com despite Arizona ordering the latter company not to offer event contracts in the state.
“I think the department would look similarly on someone who’s partnering with someone who’s doing the things that we consider to be unlawful in the state of Arizona,” Kotterman told media including SBC Americas at the conference. “But I’m not the director of the department, so I can’t speak to what she might do.”
Underdog does not offer event contracts in Arizona, according to its website, and Crypto.com confirmed to SBC Americas in December that the company stopped offering event contracts in Arizona earlier that month.
Still, Kalshi seems to believe that there is a real and imminent threat of it being Arizona’s next target for firm enforcement.
“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,” added the company.
Kalshi said it tried talking
Kalshi’s lawsuit also claims that its counsel tried to contact Mayes “to obtain written assurances of non-enforcement” but was met with silence.
The company alleges that Arizona’s AG previously indicated that she would be willing to have a conversation and even “previously assured Kalshi that it would not pursue an enforcement action without providing prior notice.”
Kalshi promised to file a motion for a temporary restraining order (TRO) and a preliminary injunction if it does not get assurances from Mayes that Arizona will not pursue a state court civil enforcement action against the company.
“Federal law preempts Arizona from subjecting Kalshi to state law,” added the filing, making the familiar arguments that the Commodity Exchange Act (CEA) places regulation of event contracts in the hands of the CFTC, above the level of state gaming regulation. “Preemption exists under straightforward principles of express preemption, field preemption, and conflict preemption. This court should therefore grant Kalshi injunctive and declaratory relief on preemption grounds.”
“As a result of defendants’ threatened conduct described above, there is a strong likelihood that defendants will take action, including, but not limited to, the enforcement of preempted state law threatened by defendants’ statements, which will violate the Supremacy Clause of the U.S. Constitution, and will subject Kalshi and its customers to irreparable harm.”
