Arizona has asked a federal court to slow proceedings in its lawsuit against prediction market operator Kalshi, pointing to an expected Ninth Circuit ruling that could influence how event-based financial contracts are regulated. The state argues the appellate decision may shape the legal foundation of the case.
In a joint filing Monday, Arizona requested that the May 6 preliminary injunction hearing be pushed to June 3 or later. All parties agreed to extend the current temporary restraining order in the meantime, preserving the existing restrictions while the case moves forward.
State officials say more preparation is required before the court rules on the injunction. They argue a delay would allow further development of issues such as standing, contract classification, and the “financial, economic, [and] commercial consequences” of prediction markets. Arizona also indicated it may add witness testimony and conduct limited discovery, stating it “anticipate[s] offering witness testimony” and plans “propounding limited, targeted written discovery.”
Federal regulators push for quicker ruling
The Commodity Futures Trading Commission (CFTC), aligned with Kalshi in the dispute, said additional briefing is unnecessary and argued the court already has sufficient arguments from all sides. It urged the judge to proceed with a preliminary injunction and stay, noting that appellate guidance may soon clarify key legal questions.
Kalshi agreed, also opposing further briefing at this stage.
The broader legal backdrop includes ongoing review in the Ninth Circuit over consolidated Nevada cases involving prediction markets. During an April 16 hearing, judges questioned whether sports-related contracts differ from traditional gambling. US Circuit Judge Ryan Nelson described industry arguments as “sophistry to the nth degree… it’s still the house.” The panel also expressed doubt about claims that such products fall outside gambling laws.
Arizona argues any appellate ruling could “bind the Court’s evaluation” or reduce the need for further district court proceedings.
Contested scope of enforcement restrictions
A separate disagreement centers on how the current temporary restraining order should be interpreted. Arizona believes it bars enforcement actions but still permits investigative steps, including subpoenas. Officials say agencies can continue fact-finding but cannot file new cases while the order remains active.
“In other words, Defendants have the same ability to investigate as they did prior to the TRO, but they must hold short of filing any cases based on any such investigations. Defendants respectfully request the Court confirm that their understanding is correct.”
Federal regulators and Kalshi reject that view, warning it could interfere with oversight of derivatives markets and create regulatory harm.
The dispute follows earlier federal actions. On April 6, the CFTC sued Arizona, Connecticut, and Illinois, asserting exclusive authority over prediction markets and warning that state restrictions risk fragmenting national oversight.
On March 17, Arizona regulators raised concerns that prediction markets resemble gambling, citing contracts tied to elections, sports, legislation, and even event specifics such as speech patterns or shutdown durations. Officials said the products function like wagering systems despite being presented as trading tools. State gaming authorities, including Suzanne Trainor of the Arizona Department of Gaming, described them as gambling-related and said the state favors bringing them under regulatory control rather than banning them outright.
Source:
“Arizona Seeks to Delay Kalshi Case as Ninth Circuit Decision Looms”, gamblinginsider.com, April 21, 2026
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