Federal court blocks Arizona crackdown on Kalshi’s event contracts

Arizona just got a judicial smackdown. A federal judge has temporarily blocked state officials from enforcing gambling laws against Kalshi — siding with US regulators in the escalating battle over whether event-based trading products are legit derivatives or just glorified betting.

Judge Michael Liburdi of the US District Court for Arizona dropped the order on Friday, granting the CFTC and federal government’s request to halt any state-level action against contracts listed on CFTC-regulated markets. Translation: Arizona can’t touch Kalshi’s event contracts while the feds figure this out.

The core fight? Whether Kalshi’s “event contracts” fall under federal derivatives law (CFTC territory) or state gambling statutes. Arizona authorities tried to pursue enforcement under local gambling rules last month, but the CFTC hit back hard, asking the court to stop them cold.

The court’s take: The CFTC is likely to win the argument that these contracts qualify as “swaps” under the Commodity Exchange Act — meaning they’re federal jurisdiction, baby. The law gives the agency exclusive authority over swaps traded on designated contract markets.

Here’s the deal: Arizona officials are now temporarily prohibited from starting or continuing any civil or criminal enforcement tied to Kalshi’s event contracts on regulated exchanges. This restraining order stays in effect until April 24 while the court decides whether to issue a longer-term preliminary injunction.

This case is part of a much bigger debate about prediction markets in the US — regulators and states are clashing over whether these products are financial instruments or straight-up online betting. Last month, Utah lawmakers also passed a bill targeting Kalshi and Polymarket, classifying proposition-style bets on in-game events as gambling and aiming to block them in the state.

Meanwhile, Nevada isn’t playing nice either. Last week, a Nevada judge extended a ban preventing Kalshi from offering event-based contracts in the state, siding with regulators who argue the products amount to unlicensed gambling.

The court found that Kalshi’s offerings look suspiciously like traditional sports betting. The judge said there’s no meaningful difference between placing a wager through a sportsbook and buying a contract tied to an event outcome — concluding this activity falls under Nevada’s gaming laws.