The DOJ and CFTC are attempting to stop the Arizona lawsuit against Kalshi.

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about 8 hours ago

Federal Challenge

The DOJ and CFTC have asked a federal court to block Arizona from enforcing its gambling statutes against Kalshi’s event contracts. They contend the contracts are “swaps” under the Commodity Exchange Act, giving the CFTC exclusive jurisdiction. Allowing state regulation would create a patchwork of 50 different rules and undermine federal oversight. The agencies seek a temporary restraining order and preliminary injunction to prevent “sovereign injury.”

Arizona's Actions

Arizona issued a cease‑and‑desist letter in May 2025 and later filed criminal charges accusing KalshiEx LLC and Kalshi Trading LLC of illegal wagering. Attorney General Kris Mayes called the firms an unlicensed gambling operation offering election bets. Kalshi’s CEO Tarek Mansour labeled the lawsuit a “total overstep” and denied any gambling activity. An arraignment is set for April 13.

Nationwide Legal Landscape

The case is part of a broader fight over prediction markets, with the CFTC suing other states over similar disputes. Courts have issued mixed decisions: a New Jersey appeals court upheld federal authority, while Nevada and Ohio judges allowed state enforcement. A ruling favoring the CFTC would keep platforms under a single federal framework; a state victory could restrict access in multiple jurisdictions.

Market Growth and Risks

Prediction‑market trading volumes jumped to over $20 billion this year, up from $1.2 billion in early 2025. The rapid growth has heightened concerns about insider trading, exemplified by a Polymarket case where traders earned $1 million by predicting a U.S. military action. Regulators see the expanding activity as a catalyst for tighter oversight.