A federal judge in Arizona has issued a temporary restraining order that stops state officials from pursuing legal action against Kalshi, a company involved in event-based trading. This decision comes after the Commodity Futures Trading Commission (CFTC) requested intervention, arguing that Kalshi's contracts should be classified under federal law rather than state gambling regulations.
Judge Michael Liburdi ruled that the CFTC is likely to prevail in its claim that Kalshi's “event contracts” are considered “swaps” under the Commodity Exchange Act. This classification places them under federal jurisdiction, thereby limiting state enforcement actions. The court's order will remain in effect until April 24, as it deliberates on a potential long-term injunction.
This ruling adds to the ongoing national debate regarding the nature of prediction markets, with various states taking steps to regulate or prohibit such trading. Recently, Utah passed a law targeting similar offerings, and a judge in Nevada extended a ban on Kalshi's operations, reinforcing the perception that these products resemble traditional gambling.