TL;DR:
- The DOJ and CFTC filed a motion in federal court to block Arizona’s criminal prosecution against Kalshi over its event contracts.
- Federal agencies argue that Kalshi’s contracts on sports, weather, and politics qualify as “swaps” under the Commodity Exchange Act.
- Monthly trading volume on prediction markets surpassed $20 billion, up from $1.2 billion recorded at the start of 2025.
The United States Department of Justice (DOJ) and the Commodity Futures Trading Commission (CFTC) filed a motion in federal court to block the criminal prosecution that Arizona launched against prediction markets platform Kalshi.
The agencies argue that the event-based contracts offered by the company —tied to sports, weather, and electoral outcomes— constitute “swaps” under the Commodity Exchange Act (CEA) and therefore fall under the exclusive federal jurisdiction of the CFTC.
Arizona issued a cease-and-desist order against KalshiEx LLC and Kalshi Trading LLC in May 2025, accusing both entities of accepting illegal wagers in violation of state law. The state then moved forward with criminal charges for “betting and gambling,” with a formal arraignment hearing scheduled for April 13.
A Dispute Growing State by State
The filing by the DOJ and the CFTC must be understood within a broader federal offensive against state-level regulation of prediction markets. The central argument is that subjecting these instruments to “a patchwork of 50 state regulations” would contradict Congress’s intent to maintain uniform, liquid, and financially sound trading markets.
Judicial outcomes vary by jurisdiction. On April 6, the Third Circuit Court of Appeals ruled 2 to 1 in favor of Kalshi, determining that New Jersey regulators cannot prevent the platform from offering sports-linked contracts. Four days earlier, a judge in Nevada extended a ban against Kalshi after determining that purchasing a contract on a baseball game was “indistinguishable” from placing a bet on a state-licensed gambling platform. Judges in Ohio and Maryland also ruled against the company, while a federal judge in Tennessee sided with it in February.
Unstoppable Markets
Polymarket, Kalshi’s direct competitor, faces similar challenges: a class action lawsuit filed in New York in February accuses it of operating as an unlicensed sports betting platform, and Nevada is pursuing civil actions against its parent company.
Despite the headwinds, the sector is recording meteoric growth. According to data from TRM Labs, monthly trading volume across all platforms recently surpassed $20 billion, up from $1.2 billion at the start of 2025.
