Arizona Urges CFTC to Ban Prediction Markets as Illegal Gambling

Arizona’s Case Against Prediction Markets

Arizona Department of Gaming (ADG) Director Jackie Johnson sent a five-page letter to Commodity Futures Trading Commission (CFTC) Acting Chair Caroline Pham, urging a federal ban on prediction markets like Kalshi, Crypto.com, and Robinhood.

Arizona says these platforms, which let users buy contracts on sports outcomes, are no different from sportsbooks. “This conduct amounts to illegal gambling in Arizona, the promotion of which is a felony,” Johnson wrote, citing state law.

She argues they dodge Arizona’s 2020 Gaming Act, which limits event wagering to 20 licensed entities, including tribes and sports teams, generating $42.7 million in 2024 privilege fees.

Arizona’s 2020 Gaming Act, shaped by public input and tribal talks, sets strict rules: licensing, age checks, geolocation, and responsible gaming measures. Johnson says prediction markets skip these, claiming CFTC oversight exempts them from state law.

This, she argues, breaks tribal gaming compacts, which require tribes to run gambling on their lands. Licensed operators face hefty costs, while prediction markets operate unregulated, hurting tribes and state revenue. “The public suffers,” Johnson wrote, noting $170 million in tribal gaming contributions last year.

Slamming CFTC’s Silence

Johnson didn’t hold back on the CFTC, blasting its “inaction” for prioritizing “private business concerns” over public interest. She pointed to the CFTC’s canceled April 2025 roundtable on prediction markets and its dropped appeal against Kalshi in D.C. federal court.

Arizona says CFTC’s failure to enforce rule 17 CFR 40.11(a)(1) lets these platforms thrive. Johnson wants the CFTC to deem event contracts as gambling and ban them outright.

Other states, like Nevada and New Jersey, also issued cease-and-desist orders to Kalshi.

Pushback and Legal Fights

Kalshi and others argue their contracts are financial derivatives under CFTC’s sole purview, not state-regulated gambling. Kalshi’s sued states like Nevada and New Jersey, winning preliminary injunctions, claiming federal law preempts state bans. Nevada’s Resort Association joined a case against Kalshi, bolstering state efforts.

Arizona’s ADG issued its own cease-and-desist orders to Kalshi, Crypto.com, and Robinhood in May 2025, demanding they stop offering sports contracts.

Arizona’s letter, copied to CFTC’s Thomas Smith and Brian Young, seeks to force a federal reckoning. With seven states targeting prediction markets, pressure’s mounting. But CFTC’s silence, especially with Acting Chair Pham stepping down soon, suggests no quick fix.