Kalshi Goes on the Offensive, Filing Lawsuits Against Arizona and Iowa
Kalshi, a prominent prediction market company, has initiated legal action by filing lawsuits against state gaming regulators in Arizona and Iowa, with the expectation that these states will implement measures to prevent the company from trading its lucrative sports event contracts within their respective jurisdictions.
Kalshi Throws the First Punch
Kalshi has been served a blizzard of cease-and-desist letters by state gaming commissions attempting to ban them from offering sports event contracts in their jurisdictions. The regulators have been taking legal measures against prediction markets, with only some degree of success, to protect the mobile sportsbooks operating in those states that pay them licensing fees and taxes.
Prediction markets do neither, as they are licensed and governed by the Commodity Futures Trading Commission (CFTC), a federal agency whose authority supersedes that of any state agency. But whether that federal dominion usurps that of the states remains a legal question that has not been clearly defined, despite rulings both for and against the prediction market platforms.
Preemptive Lawsuits
However, Kalshi is going on the offensive, and instead of waiting for what they believe will be inevitable legal action from Arizona and Iowa, the company’s counsel has decided to be proactive rather than reactive. Last Thursday, the company filed a federal lawsuit against the Arizona Department of Gaming in the District of Arizona, only a day after it did the same to Iowa’s regulators.
The action against Iowa was precipitated by a contentious meeting with Iowa Attorney General Brenna Bird, whose team interrogated Kalshi’s representatives as to why they believed they could offer sports event contracts throughout the nation with impunity.
However, in the other instance, Arizona’s Department of Gaming (ADG) had already sent a cease-and-desist letter to Kalshi 10 months ago, and the next legal shoe to drop, filing a lawsuit, appeared to be a fait accompli.
Arizona Says Kalshi Mirrors Sports Betting
Although the ADG did concede that Kalshi had made an “attempt to legitimize its conduct” by branding its sports event contracts as “innovation” and “sports event trading” under the auspices of the CFTC, it also stated that “there is no meaningful difference” between Kalshi’s sports event contracts and the sports betting offerings by the mobile sportsbooks regulated and licensed by the ADG.
Arizona Warns Underdog
Underdog is licensed in Arizona to offer its daily fantasy sports platform, but it has also branched into the sports event contract realm in a partnership with Crypto.com. That drew the ire of the Arizona Gaming Department, and it issued a notice of violation and intention to revoke Underdog’s daily fantasy sports (DFS) license.
As of December 2025, Underdog stopped offering sports event contracts in the Grand Canyon State, but that may not insulate them from further action as long as they continue to offer that product in other markets.
Arizona Office of the Governor Senior Policy Advisor Chris Kotterman commented on the policy at the National Council of Legislators from Gaming States (NCLGS) Winter Meeting in Puerto Rico, stating, “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. But I’m not the director of the department, so I can’t speak to what she might do.”
Kalshi, a prominent prediction market company, has initiated legal action by filing lawsuits against state gaming regulators in Arizona and Iowa, with the expectation that these states will implement measures to prevent the company from trading its lucrative sports event contracts within their respective jurisdictions.
Kalshi Throws the First Punch
Kalshi has been served a blizzard of cease-and-desist letters by state gaming commissions attempting to ban them from offering sports event contracts in their jurisdictions. The regulators have been taking legal measures against prediction markets, with only some degree of success, to protect the mobile sportsbooks operating in those states that pay them licensing fees and taxes.
Prediction markets do neither, as they are licensed and governed by the Commodity Futures Trading Commission (CFTC), a federal agency whose authority supersedes that of any state agency. But whether that federal dominion usurps that of the states remains a legal question that has not been clearly defined, despite rulings both for and against the prediction market platforms.
Preemptive Lawsuits
However, Kalshi is going on the offensive, and instead of waiting for what they believe will be inevitable legal action from Arizona and Iowa, the company’s counsel has decided to be proactive rather than reactive. Last Thursday, the company filed a federal lawsuit against the Arizona Department of Gaming in the District of Arizona, only a day after it did the same to Iowa’s regulators.
The action against Iowa was precipitated by a contentious meeting with Iowa Attorney General Brenna Bird, whose team interrogated Kalshi’s representatives as to why they believed they could offer sports event contracts throughout the nation with impunity.
However, in the other instance, Arizona’s Department of Gaming (ADG) had already sent a cease-and-desist letter to Kalshi 10 months ago, and the next legal shoe to drop, filing a lawsuit, appeared to be a fait accompli.
Arizona Says Kalshi Mirrors Sports Betting
Although the ADG did concede that Kalshi had made an “attempt to legitimize its conduct” by branding its sports event contracts as “innovation” and “sports event trading” under the auspices of the CFTC, it also stated that “there is no meaningful difference” between Kalshi’s sports event contracts and the sports betting offerings by the mobile sportsbooks regulated and licensed by the ADG.
Arizona Warns Underdog
Underdog is licensed in Arizona to offer its daily fantasy sports platform, but it has also branched into the sports event contract realm in a partnership with Crypto.com. That drew the ire of the Arizona Gaming Department, and it issued a notice of violation and intention to revoke Underdog’s daily fantasy sports (DFS) license.
As of December 2025, Underdog stopped offering sports event contracts in the Grand Canyon State, but that may not insulate them from further action as long as they continue to offer that product in other markets.
Arizona Office of the Governor Senior Policy Advisor Chris Kotterman commented on the policy at the National Council of Legislators from Gaming States (NCLGS) Winter Meeting in Puerto Rico, stating, “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. But I’m not the director of the department, so I can’t speak to what she might do.”
