A federal judge in Arizona has temporarily barred state officials from enforcing gambling laws against Kalshi, siding with federal regulators in a dispute over how event-based trading products should be classified.
In an order issued Friday, U.S. District Judge Michael Liburdi granted a request from the Commodity Futures Trading Commission (CFTC) and the U.S. government to halt any state-level action targeting contracts listed on CFTC-regulated markets. The CFTC asked the court to intervene after Arizona authorities moved to pursue enforcement under state gambling statutes.
The central question in the case is whether Kalshi’s so-called “event contracts” are governed by the Commodity Exchange Act as “swaps,” placing them under federal jurisdiction, or whether they fall within state gambling laws. The court found the CFTC is likely to succeed in arguing the contracts qualify as swaps, noting the Commodity Exchange Act gives the agency exclusive authority over swaps traded on designated contract markets.
Under the temporary restraining order, Arizona officials are barred from initiating or continuing civil or criminal enforcement actions tied to Kalshi’s event contracts on regulated exchanges. The order will remain in place until April 24 while the court considers whether to issue a longer-term preliminary injunction.
The dispute is part of a wider regulatory and legal debate over prediction markets and event-based trading in the United States. Some states and courts view proposition-style contracts as a form of gambling, while the CFTC and the platforms contend they are financial derivatives subject to federal oversight.
State-level measures have proliferated recently. In March, Utah passed legislation that classifies in-game proposition wagers as gambling and aims to bar platforms such as Kalshi and Polymarket from offering those products in the state. Last week, a Nevada judge extended a separate ban preventing Kalshi from offering event-based contracts in that state; the Nevada court agreed with regulators who argued the contracts resembled unlicensed sports betting and found little meaningful distinction between placing a bet through a sportsbook and purchasing a contract tied to an event outcome.
The Arizona order does not resolve the underlying legal question, but it prevents immediate state enforcement while the federal case proceeds. The outcome of this litigation could shape how prediction markets are regulated across the country and clarify the boundary between federally regulated derivatives and state-level gambling laws.