TLDR
- Arizona is asking a federal court to postpone its next hearing against Kalshi from May 6 to June 3 or later
- A pending Ninth Circuit ruling in a related Nevada case could directly shape the outcome of the Arizona dispute
- The CFTC and Kalshi both oppose the delay, saying additional briefing is unnecessary
- Ninth Circuit judges questioned whether sports event contracts are different from traditional gambling during an April 16 hearing
- Arizona and Kalshi also disagree over whether the current temporary restraining order allows the state to investigate possible violations
Arizona officials are asking a federal court to push back a key hearing in their legal fight with prediction market platform Kalshi. The state wants more time to build its case, but a looming appeals court decision could change everything.
In a joint status report filed Monday, Arizona requested the May 6 hearing on a preliminary injunction be moved to June 3 or later. All parties agreed to extend the current temporary restraining order while the case is paused.
State attorneys said they need more time to develop the factual record. They want to brief additional issues including standing, how event contracts are classified, and the financial consequences tied to prediction markets.
Arizona also said it plans to bring in witness testimony. The state indicated it may pursue limited discovery to strengthen its arguments before the court.
The Commodity Futures Trading Commission, which stepped into the case on Kalshi’s side, pushed back on the delay. The agency said the court already has enough information from all parties to move forward.
Kalshi agreed with the CFTC. The company said it does not believe additional briefing is needed and wants the court to act now.
The CFTC has urged the court to issue a preliminary injunction and a stay. The agency is watching the Ninth Circuit closely, expecting a ruling that could settle key questions about federal preemption.
Ninth Circuit Hearing Raises Tough Questions for Prediction Markets
All sides in the Arizona case acknowledge that a decision from the Ninth Circuit Court of Appeals could reshape the legal landscape. The appellate court is handling consolidated cases from Nevada involving prediction market platforms.
During an April 16 hearing, Ninth Circuit judges were skeptical of arguments made by prediction market companies. They questioned whether sports-based event contracts are really different from traditional betting.
U.S. Circuit Judge Ryan Nelson was blunt in his criticism. He called the distinction between prediction markets and gambling “sophistry to the nth degree,” adding, “it’s still the house.”
The panel also pushed back on claims that these products fall outside state gambling laws. The judges questioned whether federal law can override state-level gambling regulation in this area.
Arizona’s court filing noted that a Ninth Circuit ruling could “bind the Court’s evaluation” of its own case. It could also make further proceedings in Arizona unnecessary altogether.
Dispute Over Restraining Order Scope Adds Another Layer
Beyond the scheduling fight, Arizona and Kalshi are at odds over what the current temporary restraining order actually allows. The order blocks Arizona from enforcing its gambling laws against Kalshi’s event contracts.
Arizona officials said they believe the order only stops them from filing new enforcement actions. They argued it still allows them to investigate potential violations of state law, including by issuing subpoenas.
The state asked the court to confirm that interpretation. Federal regulators and Kalshi rejected that reading of the order.
They warned that allowing investigations would cause harm and interfere with federal oversight of derivatives markets. The CFTC maintains that prediction market contracts fall under its regulatory authority.
The case remains one of several legal battles playing out across the country over how prediction markets should be regulated. Arizona filed the case as part of a broader push by states to assert control over event-based contracts they view as gambling.
The Ninth Circuit is expected to issue its ruling in the coming weeks.
