The head of the Arizona Department of Gaming (ADG) has criticized the Commodity Futures Trading Commission (CFTC) for allegedly failing to take a firm hand against prediction markets offering sports event contracts.
In a comment letter filed on Monday and addressed to acting CFTC Chair Caroline Pham, ADG Director Jackie Johnson argued that Designated Contract Markets (DCMs) such as Kalshi, Robinhood and Crypto.com are in violation of state law by offering what equates to “illegal” sports event wagering. She noted that promoting such offerings is a felony.
“The DCMs claim that their operations enable ‘trading’ of financial derivatives, which is conduct regulated by the CFTC. In truth, there is no meaningful difference between buying one of the contracts offered by the DCMs and placing a bet with any other sportsbook,” she wrote. “And, whatever regulation the CFTC undertakes, it does not reflect the desires of the citizens of Arizona.”
Regulator says Arizona did not sign up for this
Pointing to the 2020 Gaming Act, which opened the door for online sports betting in Arizona, Johnson asserted that lawmakers never intended the act would allow Arizonans to effectively wager on sports via DCMs.
“To be clear, the people of the State have significant interest in the CFTC taking action to stop the DCMs,” she stressed.
Johnson also alleged that the DCMs offering sports trading is in direct violation of state laws including the tribal-state gaming compacts in place under the Indian Gaming Regulatory Act.
“The DCMs have come into Arizona and upset these carefully constructed agreements, despite the extensive requirements surrounding gambling on Indian lands, the most relevant of which is that the gambling must be operated by Tribal nations themselves,” Johnson added.
The ADG chief accused the CFTC of changing its stance on sports event contracts without due cause and of inaction in enforcing its own rules, which she stated has proven to prioritize the private companies over public interest.
Arizona just told prediction market operators to get out
The ADG sent the letter to the CFTC less than two weeks after it told SBC Americas that it had issued cease-and-desist orders to both Kalshi and Crypto.com.
Arizona is the seventh state to confirm that it has sent an order to Kalshi, after Nevada, New Jersey, Maryland, Montana, Ohio and, most recently, Illinois. Others such as Massachusetts, Michigan, Pennsylvania and Connecticut have launched investigations into DCMs.
The ADG noted to SBC Americas that Kalshi and Crypto.com each have made an “attempt to legitimize its conduct” by labeling it as an “innovation” and “sports event trading,” respectively. In response to that cease-and-desist letter, a Kalshi spokesperson reiterated to SBC Americas that its event contracts remain under the exclusive jurisdiction of the CFTC.
