The CFTC is seeking to block Arizona's enforcement of the law against Kalshi, arguing that sports betting contracts fall under federal jurisdiction as financial derivatives.

The Commodity Futures Trading Commission (CFTC) and the U.S. Department of Justice filed documents in federal court on Tuesday seeking to block Arizona from applying its gambling laws to prediction market operator Kalshi. Federal regulators argue that contracts linked to sporting events, elections, and other real-world events are financial derivatives known as "swaps" and should be subject to federal regulation under the Commodity Exchange Act, not state gambling laws. Arizona has already filed criminal charges against Kalshi under its state gambling laws, with arraignment scheduled for April 13. Previously, a New Jersey federal appeals court ruled in favor of Kalshi, finding its sports contracts presumed legal under federal law in the absence of CFTC intervention, but other jurisdictions allowed state enforcement action to proceed. If the courts ultimately accept the CFTC's position, prediction markets could operate nationwide under a unified federal framework.