Arizona Attorney General Kris Mayes recently filed 20 misdemeanor criminal charges against prediction market company Kalshi, accusing it of illegally operating a gambling business and allowing bets on elections in violation of state law.
This marks the first time a state has pursued criminal action against the company, but not the first legal clash between states and prediction market companies that allow users to bet on almost anything — from geopolitics to awards shows to sporting events.
States have traditionally held primary oversight over gambling in the United States, governing the day-to-day regulation, licensing, and enforcement of gambling activities that are largely handled through agencies such as gaming commissions.
Yet prediction-market companies such as Kalshi, PredictIt, and Polymarket argue that their products are not gambling but federally regulated financial instruments.
From Kalshi’s website, the company writes: “Prediction markets, sometimes referred to as event contracts, derivatives, idea futures, information markets and more, have actually been around for centuries … In reality, they have much more in common with futures trading or trading in the stock market than they do with traditional sportsbooks.”
Under this broadened definition, the companies would fall under federal regulation, overseen by a relatively small federal agency called the Commodity Futures Trading Commission (CFTC).
In February, CFTC Chairman Mark Selig announced on X that the agency filed an amicus brief to “defend its exclusive jurisdiction” over the markets, seemingly siding with the companies’ legal theory regarding regulation. “To those who seek to challenge our authority in this space, let me be clear: We will see you in court,” Selig said.
Caught between these federal and state fissures — and an industry worth billions — are everyday Americans who tend to see prediction markets for what they are: gambling.
A new poll reveals that 61% of American adults consider prediction markets to be closer to gambling. Unfortunately, emerging data seems consistent with public perception.
According to the National Problem Gambling Helpline™ Modernization Project, “In 2021, calls to the National Problem Gambling Helpline™ increased by 43%, texts increased by 59.8% and chat volume increased by 84.1%. As states expand legalized sports betting, we expect these numbers to continue to grow.”
The National Council on Problem Gambling estimates that 2.5 million Americans have a “severe” gambling addiction, and that millions more have a moderate or mild issue, meeting at least some of the criteria indicating a problem. This number is likely to grow given the distinct, and particularly effective, method of gambling integration into our everyday lives.
Since the Supreme Court struck down PASPA in Murphy v. NCAA in 2018, enabling states to legalize sports betting, it has moved onto smartphones, allowing users to place wagers anytime, anywhere — a shift experts say is fueling more problematic behavior and more people seeking help. Public health researchers point to the design of online platforms — fast-paced, always available, and heavily promoted — as key drivers of risk.
Gambling is especially dangerous for young people. In fact, about 1 in 10 young men ages 18 to 30 show signs of gambling addiction — more than three times the rate of the general population, underscoring how disproportionately these harms are affecting younger adults. Because online platforms make gambling constant and frictionless, losses can accumulate faster and in isolation, a dynamic public health experts say increases risk.
This combination of widespread access, rapid losses, and serious psychological consequences elevates gambling from a niche concern to a broader public health issue that are concerning to mental health advocates.
The Kennedy Forum believes that online gambling has clear, negative effects on the mental health of the American people. As this landscape continues to shift, policymakers, regulators, and public health leaders face a narrowing window to address the risks before they become further entrenched.
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