The US Department of Justice and the Commodity Futures Trading Commission have jointly asked a federal court to prevent Arizona from enforcing its state gambling laws against prediction market platform Kalshi. The Wednesday filing contends that event contracts listed on federally regulated platforms qualify as swaps under the Commodity Exchange Act, placing them squarely within the CFTC’s exclusive jurisdiction. The agencies argue that Arizona’s enforcement effort unlawfully intrudes on that federal authority.
If the court grants the request, Arizona would be barred from applying its gambling statutes to prediction market contracts that are listed as federally regulated event contracts. The case carries significant implications for how such contracts are classified across the country. An arraignment in the criminal case against Kalshi is currently scheduled for April 13.
The dispute stems from charges announced on March 17 by Arizona Attorney General Kris Mayes, who accused the companies behind Kalshi of operating an illegal gambling business in the state without a license and offering unlawful election wagering. Kalshi co-founder and CEO Tarek Mansour rejected the accusations, describing them as a “total overstep” and insisting the matter was “not about gambling.” The case has since emerged as a central test of whether prediction market contracts fall under federal commodities law or state betting regulations.
The CFTC has also taken broader action on the issue, filing three separate lawsuits on April 2 against gaming regulators in Illinois, Connecticut, and Arizona. Those suits assert that the CFTC holds exclusive jurisdiction over registered designated contract markets that list lawful event contracts. Kalshi is identified as the most prominent example in the current wave of litigation.
Prediction markets are facing mounting legal pressure across the United States, with 11 states having pursued legal action against such platforms. The regulatory scrutiny has intensified alongside a surge in prediction market activity tied to recent geopolitical events. Six traders on rival platform Polymarket drew attention after collectively netting $1 million by accurately wagering on a US military strike against Iran, prompting renewed allegations of insider trading.
In response to those concerns, Democratic Senator Adam Schiff has introduced legislation that would ban prediction markets covering war, death, and terrorism. The proposal reflects growing unease among lawmakers about the potential for such platforms to be exploited for financial gain using non-public information. The outcome of the Arizona case and related federal suits is expected to shape the regulatory landscape for prediction markets nationwide.
Originally reported by CoinTelegraph.
