The move, similar action from New Jersey, Nevada, Illinois, Ohio, Montana and Maryland.
Robinhood and Crypto.com also targeted
NEXT.io understands the two other providers of sports event-contracts, Robinhood, which is also a Kalshi partner, and Crypto.com, were also sent similar letters by the Grand Canyon State gaming regulator.
The letter said: “The Department recognises Kalshi’s attempt to legitimise its conduct by labelling it as an “innovation” regulated by the Commodity Futures Trading Commission. In fact, there is no meaningful difference between buying one of your offered contracts and placing a bet with any other sportsbook.
“And, Kalshi is avoiding regulatory requirements in Arizona to include licensing and background investigations, the prohibition on wagers by persons under 21 years of age, and requirements relating to integrity monitoring and problem gambling.”
In response to receiving similar letters in other states, Kalshi has moved to sue the regulators and other state officials in federal court, highlighting it has authorisation for its activities from the CFTC.
So far, the company has successfully obtained stays from federal courts that have allowed it to continue its activities.
The letter continued: “The Department requires that Kalshi cease gambling operations in Arizona and desist from engaging in those activities in the future. Failure to do so is further evidence of your ongoing knowing and wilful violation of the law.
“Note that, among other things, Kalshi is subject to a potential restitution award for those who lost money, and an action forfeiting all monies it acquired, because of its illegal conduct. The statutes and criminal violations referred to in this letter are not exhaustive.“This letter is intended only to place you on notice that the Department is aware of Kalshi’s conduct and to direct you to take immediate steps to comply with Arizona law. Future actions may include the filing of criminal charges or a civil action against Kalshi and/or its principals or employees.”
Latest twist in Kalshi controversy
The cease-and-desist marks the latest twist in the evolving controversy about the legality of prediction markets in the US.
While the Biden istration had sought to clamp down on the activity, which at the time was largely restricted to political betting, the Trump istration is considered much more friendly to the emerging vertical.
Signs to this have included the nomination of Kalshi board member Brian Quintenz as chair of the CFTC, who is expected to build a friendly regulatory environment.
However, until then the situation remains somewhat in limbo, with the courts likely to provide the main source of clarity.
While a widely touted prediction markets roundtable was expected to take place 30 April, the event was cancelled for unknown reasons, although a smaller meeting with tribal leaders is expected to take place letter this month.
According to former CFTC lawyer and Jones Day counsel David Aron, Quintenz’s nomination has been pushed back another month, with confirmation now not expected until late summer.
This comes amid several resignations that have left just two remaining CFTC commissioners in post, including the chair.
Aron said on LinkedIn: Although the CFTC can work with any number of Commissioners, if it’s just Acting Chair Pham and Commissioner Johnson, not much is likely to get done if they vote along party lines.”
