On May 21, 2025, the Arizona Department of Gaming sent Kalshi a cease-and-desist letter. Regulators claimed the company was illegally offering "event wagering" without "licensure and compliance with Arizona statutes and regulations." Kalshi responded by filing suit in federal court on March 12, 2026, against Arizona gaming director Jackie Johnson and Attorney General Kristin Mayes. The company argued that federal law preempts Arizona from regulating contracts traded on federally approved Designated Contract Markets.