Arizona Attempts to Restart Legal Fight Against Kalshi

Arizona’s attorney general, Kris Mayes, has petitioned the 9th US Circuit Court of Appeals to overturn an earlier ruling that barred the state from pursuing legal action against prediction platform Kalshi. Mayes argues that a similar Nevada case confirmed that states can regulate sports-related prediction contracts. Meanwhile, such companies insist that their offerings are financial derivatives under CFTC jurisdiction. Kalshi Secured a Preliminary Injunction Against Arizona Mayes’ newest move against prediction markets follows a May court ruling that sided with prediction platform Kalshi, preventing the AG from prosecuting the New York-based firm under Arizona gambling laws. US District Judge Michael Liburdi concluded that oversight of platforms like Kalshi falls squarely within the Commodity Futures Trading Commission’s authority. Kalshi, likewise, maintains that its products do not function as traditional bets and are instead a type of financial derivative. The company presents its offerings as “event contracts” that allow users to trade on the likelihood of real-world outcomes. This distinction has been Kalshi’s primary legal defense, which has sparked a wave of lawsuits across several US states. Many state regulators argue that sports-related prediction contracts are indistinguishable from wagering, as users essentially bet on the outcome of a game. Mayes alleged that Kalshi was running an illegal gambling operation, which is against Arizona law. If her challenge succeeds, prediction platforms without state gambling licenses would likely be forced to limit some of their offerings in the state. A Similar Case in Nevada Went the Other Way Mayes’ arguments rest on a recent 9th Circuit ruling that rejected Kalshi’s bid to prevent Nevada gaming regulators from regulating its sports contracts. The panel concluded that some types of contracts are sufficiently similar to sports betting and thus do not enjoy the federal protection sought by Kalshi. This decision led the state to impose severe restrictions on the platform. This Court must vacate the district court’s preliminary injunction to the same extent as it affirmed the dissolution of the Nevada preliminary injunction. Kris Mayes, Arizona attorney general In her newest appeal, Mayes argues that the Nevada ruling directly contradicts May’s injunction preventing Arizona from prosecuting Kalshi for violating state gambling law. The AG contends that the two cases are virtually identical and therefore must have the same ruling. She is now asking for a rehearing, hoping to overturn the injunction and take action against prediction markets. Such conflicting rulings demonstrate the increasingly contentious nature of prediction markets. Many lawmakers now argue that the Supreme Court of the United States should deliver a definitive ruling. However, even if it were to pick up this case, an official verdict would not arrive for several months. In the meantime, the lower courts must sort out these conflicting rulings.