Federal court stops Arizona crackdown on Kalshi’s event contracts

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• Federal court blocks Arizona from enforcing gambling laws against Kalshi
• CFTC likely to prevail in classifying event contracts as swaps
• Temporary restraining order in effect until April 24
• States vs federal regulators clash over prediction markets intensifies
• Nevada extends ban on Kalshi, citing similarities to sports betting

Federal Court Sides With CFTC

A federal judge in Arizona has temporarily barred state officials from enforcing gambling laws against Kalshi, siding with US regulators in an ongoing dispute over the classification of event-based trading products. In an order issued Friday, Judge Michael Liburdi of the US District Court for the District of Arizona granted a request from the Commodity Futures Trading Commission (CFTC) and the federal government to halt any state-level action targeting contracts listed on CFTC-regulated markets.

IT IS FINALLY ORDERED that this Temporary Restraining Order will remain in effect until April 24, 2026, at 11:59 p.m. (Arizona time).

The dispute centers on whether Kalshi’s “event contracts” should be treated as financial derivatives under federal law or as gambling products under state regulations. Arizona authorities had sought enforcement under local gambling statutes last month, prompting the CFTC to seek court intervention.

Contracts Likely Classified as Swaps

The court stated that the CFTC is likely to succeed in its argument that the contracts qualify as “swaps” under the Commodity Exchange Act. This classification would place them under federal jurisdiction.

The law grants the CFTC exclusive authority over swaps traded on designated contract markets. Based on this, Arizona officials are temporarily prohibited from initiating or continuing civil or criminal enforcement related to Kalshi’s event contracts on regulated exchanges. The restraining order will remain in effect until April 24, while the court considers whether to issue a longer-term preliminary injunction.

Broader Regulatory Clash Across States

The case adds to a broader debate in the United States over prediction markets and their legal classification. Regulators and state authorities continue to disagree on whether such products function as financial instruments or resemble online betting. Last month, Utah lawmakers passed a bill targeting Kalshi and Polymarket, classifying proposition-style bets on in-game events as gambling in an effort to restrict such offerings.

In Nevada, a judge recently extended a ban preventing Kalshi from offering event-based contracts in the state. The court found that the platform’s products closely resemble traditional sports betting and concluded there is no meaningful distinction between wagering through a sportsbook and purchasing contracts tied to event outcomes.