Traders flocked to prediction markets—now a criminal case is testing the model

Kalshi made headlines last month over allowing people to place wagers on the Iran war. Now the prediction market platform is being sued by the state of Arizona, the first state to file criminal charges against the controversial company. 

The platform, which allows users to place wagers on happenings, such as sports games or even current events, is being accused of operating an illegal gambling business that violates the state’s laws. In a 20-count document, prosecutors alleged that the...