The Arizona Department of Gaming (ADG) issued cease and desist letters. These went to Kalshi, Robinhood, and Crypto.com. All three are sports-event contract providers. Robinhood partners with Kalshi on some offerings. Crypto.com also received a letter from the regulator.

The department’s letter explained that Kalshi tries to legitimize its actions. It uses the term “innovation” and mentions regulation by the Commodity Futures Trading Commission (CFTC). The department states that buying Kalshi’s contracts works like betting with a regular sportsbook. Requirements in Arizona include licensing, background checks, bans on betting for people under 21, controls for monitoring betting integrity, and rules for problem gambling prevention. ADG claims Kalshi has avoided these.

Kalshi, when faced with similar letters in other states, has gone to federal court. The company argues that CFTC authorization covers its activities. Federal courts have issued stays. This means Kalshi continues operation while the matter is reviewed.

The Arizona regulator’s letter required Kalshi to stop all gambling activity in Arizona. The letter also warned that failure to follow orders would be evidence of ongoing violation. The department may seek restitution for anyone losing money. If proven, Kalshi could forfeit any money made through these activities. The letter listed statute violations. The department said the list was not complete. Officials explained that this letter serves as a formal notice. Kalshi must immediately follow Arizona law or face possible civil or criminal cases against the company or its staff.

This action forms part of a broader controversy around US prediction markets. Prediction markets let people place contracts on uncertain events. Questions exist in the United States about whether these markets count as gambling or trading futures. Under the Biden Administration, political betting faced increased restrictions. In contrast, the Trump Administration supported more prediction market activity.

Kalshi board member Brian Quintenz is expected to be nominated as CFTC chair. Many see his nomination as a sign of a friendlier stance towards prediction markets. The chairmanship is a central regulatory position for US derivatives markets. However, court action remains the main source of resolution while Quintenz’s confirmation is delayed. The regulator cancelled a major prediction markets roundtable originally planned for 30 April. No reason for the cancellation was given. A smaller meeting with tribal leaders is planned for later in the month.

David Aron, a former CFTC attorney and Jones Day legal counsel, reported Quintenz’s formal confirmation will not happen before late summer. Some CFTC commissioners have resigned. As of now, only two, including the acting chair, remain at the commission. Aron commented that only Acting Chair Pham and Commissioner Johnson are available. This situation reduces the commission’s ability to take major actions if voting divides along party lines.