Arizona Attempts to Restart Legal Fight Against Kalshi

By jili tutorial · September 29, 2026

The Battle Over Prediction Markets: Arizona vs. Kalshi

Introduction: A High-Stakes Legal Dispute

The legal landscape surrounding prediction markets in the United States is growing increasingly complex and contentious. At the center of a new conflict is Arizona’s Attorney General, Kris Mayes, who has petitioned the 9th US Circuit Court of Appeals to overturn a previous court ruling. That ruling had prevented the state from taking legal action against Kalshi, a prominent New York-based prediction platform. This move represents the latest chapter in a nationwide struggle between state regulators who view these platforms as illegal gambling operations and companies that insist they are legitimate financial instruments.

What Are Prediction Markets? A Brief Overview

Prediction markets, also known as “event contracts,” are platforms where users can buy and sell shares based on the probability of a specific real-world outcome. For example, a user might purchase a contract that pays out if a certain candidate wins an election or if a sports team achieves a particular score. Kalshi presents its offerings specifically as financial derivatives – a type of investment whose value is derived from an underlying event. The company argues that these contracts are fundamentally different from traditional bets, and thus should be regulated by the federal Commodity Futures Trading Commission (CFTC), not by individual state gambling laws.

The Core Legal Dispute: Gambling vs. Financial Derivatives

The tension in this case, and in similar lawsuits across multiple states, boils down to a single question: Are event contracts a form of wagering or a legitimate financial product?

Kalshi’s Defense: The company maintains that its products operate within the framework of financial markets. Users do not simply “bet” on an outcome; rather, they trade contracts that reflect the shifting probabilities of future events. This distinction has been Kalshi’s primary legal defense, shielding it from being classified as a gambling operation under state law.
State Regulators’ Arguments: Many state attorneys general, including Mayes, argue that sports-related prediction contracts are indistinguishable from wagering. When a user effectively bets on the outcome of a game, the transaction looks, feels, and functions like a bet, regardless of how the platform structures it. They contend that these markets fall squarely under state gambling prohibitions.

Arizona’s Attorney General Fights Back: The New Petition

Mayes’ latest move follows a significant setback in May 2025. At that time, US District Judge Michael Liburdi ruled in favor of Kalshi, granting a preliminary injunction that prevented the Arizona AG from prosecuting the company under state gambling laws. Judge Liburdi concluded that oversight of platforms like Kalshi falls exclusively within the CFTC’s authority, not the state’s.

Now, Mayes is appealing that decision. Her core argument rests on a recent and contrasting ruling from the same 9th Circuit court.

The Nevada Precedent: A Key Turning Point

Mayes draws heavily on a case involving Nevada’s gaming regulators and Kalshi. In that instance, the 9th Circuit rejected Kalshi’s bid to prevent Nevada from regulating its sports contracts. The panel of judges concluded that some types of contracts are sufficiently similar to sports betting and thus do not enjoy the federal protection the company sought. Consequently, Nevada was able to impose severe restrictions on the platform’s operations within its borders.

In her petition, Mayes explicitly references this contradiction: “This Court must vacate the district court’s preliminary injunction to the same extent as it affirmed the dissolution of the Nevada preliminary injunction.” She argues that the two cases are virtually identical and therefore must receive the same ruling. She is now requesting a rehearing, hoping to dissolve the injunction and clear the path for the state to take action against prediction markets like Kalshi.

Broader Implications: The Future of Prediction Markets

The conflicting rulings in Arizona and Nevada highlight a deep and unresolved legal ambiguity. This situation has significant consequences for the industry:

Need for Supreme Court Intervention: Many legal observers and lawmakers argue that the US Supreme Court must deliver a definitive ruling to settle the question of whether prediction markets fall under federal commodities law or state gambling law. A clear decision would provide uniform guidance across all 50 states.
Operational Uncertainty for Platforms: Until that ruling arrives, prediction markets face a patchwork of regulations. They might be allowed to operate freely in one state while being heavily restricted or banned in another. This creates a challenging business environment and legal gray area.
Stalemate in the Lower Courts: Even if the Supreme Court were to take up this specific case, an official verdict would not arrive for several months. In the meantime, lower courts must navigate and reconcile these conflicting rulings, leaving the legal status of prediction markets in flux.

Conclusion: A Nationwide Legal Stalemate

For now, the battle between Arizona and Kalshi is emblematic of a broader struggle. State regulators like Kris Mayes are determined to assert their authority over what they view as unlicensed gambling. Meanwhile, platforms like Kalshi are equally determined to operate under the umbrella of federal financial regulation. Until the courts—potentially the Supreme Court—provide a final answer, the legality of prediction markets will remain a contentious and unresolved question across the United States.