Horseshoe crabs (Xiphosura) are traditionally regarded as sister group to the clade of terrestrial chelicerates (Arachnida). This hypothesis has been challenged by recent phylogenomic analyses, but the non-monophyly of Arachnida has consistently been disregarded as artifactual. We re-evaluated the placement of Xiphosura among chelicerates using the most complete phylogenetic data set to date, expanding outgroup sampling, and including data from whole genome sequencing projects. In spite of uncertainty in the placement of some arachnid clades, all analyses show Xiphosura consistently nested within Arachnida as the sister group to Ricinulei (hooded tick spiders). It is apparent that the radiation of arachnids is an old one and occurred over a brief period of time, resulting in several consecutive short internodes, and thus is a potential case for the confounding effects of incomplete lineage sorting (ILS). We simulated coalescent gene trees to explore the effects of increasing levels of ILS on the placement of horseshoe crabs. In addition, common sources of systematic error were evaluated, as well as the effects of fast-evolving partitions and the dynamics of problematic long branch orders. Our results indicated that the placement of horseshoe crabs cannot be explained by missing data, compositional biases, saturation, or ILS. Interrogation of the phylogenetic signal showed that the majority of loci favor the derived placement of Xiphosura over a monophyletic Arachnida. Our analyses support the inference that horseshoe crabs represent a group of aquatic arachnids, comparable to aquatic mites, breaking a long-standing paradigm in chelicerate evolution and altering previous interpretations of the ancestral transition to the terrestrial habitat. Future studies testing chelicerate relationships should approach the task with a sampling strategy where the monophyly of Arachnida is not held as the premise.