The prediction market operator Kalshi sued the Arizona Department of Gaming in federal court on Thursday, just one day after filing a lawsuit against Iowa state regulators.
Key Takeaways
- The prediction market provider Kalshi is challenging more than a dozen states in court over the legality of its sporting event contracts.
- This week, Kalshi filed suits against both Arizona and Iowa gaming regulators.
- While some of its lawsuits are in response to state cease-and-desist orders, Kalshi’s suits against Arizona and Iowa were preemptive.
Kalshi filed a lawsuit against the Arizona Department of Gaming in the U.S. District Court in the District of Arizona on Thursday. The lawsuit cites Kalshi’s belief that "there is a substantial risk that the Attorney General of Arizona will bring an enforcement action against Kalshi on behalf of the Arizona Department of Gaming with the intent to prevent Kalshi from offering event contracts for trading on its federally regulated exchange."
BREAKING: Kalshi has sued Arizona state regulators in federal court, seeking to head off enforcement action over sports-event contracts in the state courts. Bold move considering CA9 intra-circuit precedent favoring states, but preferable to an all-but-certain state court TRO. pic.twitter.com/lQ5xoAQ3Cg
— Daniel Wallach (@WALLACHLEGAL) March 13, 2026
Kalshi’s belief may be well founded. After all, Kalshi has active lawsuits with roughly a dozen states that wish to keep Kalshi from offering sporting event contracts to their residents. Most states believe that by offering these contracts, Kalshi is violating state laws governing sports betting. Kalshi does not have an Arizona sports betting license nor an Iowa sports betting license.
Prediction markets feel they are not required to abide by state gambling laws since they are federally regulated by the Commodity Futures Trading Commission (CFTC). States, however, believe that Congress specifically intended for sports betting to be governed by the states.
Enjoying Covers content? Add us as a preferred source on your Google account
Another day, another lawsuit
Kalshi’s claim against Arizona is almost identical to its position in its recently filed Iowa lawsuit.
In Iowa, Kalshi stated, “This action challenges the State of Iowa’s intrusion into the federal government’s exclusive authority to regulate derivatives trading on exchanges overseen by the Commodity Futures Trading Commission (“CFTC”). 7 U.S.C. § 2(a)(1)(A). On information and belief, there is a substantial risk that the Attorney General of Iowa (the “Iowa AG”) will bring an enforcement action against Plaintiff KalshiEX LLC (“Kalshi” or “Plaintiff”) on behalf of the Iowa Racing & Gaming Commission (“IRGC” or the “Commission”) with the intent to prevent Kalshi from offering event contracts for trading on its federally regulated exchange.
Kalshi said it was caught off guard when it attended a recent meeting with Iowa Attorney General Brenna Bird, believing it to be a discussion about pending tax legislation. Instead, Kalshi claimed its representative was grilled by a panel of attorneys challenging Kalshi’s assertion that its federally regulated contracts did not conflict with Iowa state law.
Iowa state legislators are currently considering a bill that would require prediction markets to get a license from the Iowa Department of Revenue at a cost of $10 million.
