Arizona Regulator Sends Cease-And-Desist To Kalshi
The Arizona Department of Gaming has sent a cease-and-desist letter to the prediction market platform Kalshi for allegedly offering illegal sports betting in the state. The news was first reported by InGame here.
The letter does not mention a deadline for compliance, but asks Kalshi to take “immediate steps to comply with Arizona law.” The letter was addressed to Kalshi CEO Tarek Mansour and signed by Douglas Jensen, the ADG’s chief law enforcement officer.
InGame also reported that similar letters were sent to Crypto.com and Robinhood; both also offer sports event contracts.
Arizona is the seventh known state to issue a cease-and-desist to Kalshi, joining Nevada, New Jersey, Maryland, Montana, Illinois and Ohio. You can read more on the backstory of the legality of prediction markets here. Kalshi has sued to stop enforcement in Nevada, New Jersey and Maryland, and has won preliminary injunctions in the first two.
Here is some of the text of the letter, seen by The Closing Line:
Dear Mr. Mansour,
It has come to the attention of the Arizona Department of Gaming (the “Department”) that you, Kalshi EX LLC (“Kalshi”), are enabling the purchase of “contracts” in Arizona on future events including sports. Whether a contract will pay its buyer depends on whether that person correctly predicted the result of the event and bought a contract for the correct outcome. This amounts to Kalshi taking wagers, defined in A.R.S. § 5-1301(23)(a) as “a sum of money or thing of value risked on an uncertain occurrence.”
“Event wagering” is defined in Arizona to mean, “accepting wagers on sports events or other events… by any system or method of wagering, including in person or over the Internet through websites and on mobile devices.” A.R.S. § 5-1301(4)(a). The operation of event wagering in Arizona is allowed only if conducted pursuant to A.R.S. § 5-1301 et seq., which requires, among other things, licensure. See e.g., A.R.S. § 5-1303(A). Kalshi is not licensed and its operation of event wagering in Arizona is illegal.
The Department recognizes Kalshi’s attempt to legitimize its conduct by labeling 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 twenty-one (21) years of age, and requirements relating to integrity monitoring and problem gambling.
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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 willful 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. See e.g., A.R.S. §§ 13-804 and 13-2314.
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.