Federal judge stops Arizona’s Kalshi prosecution
Table of contents
- A US federal judge has issued a temporary restraining order blocking Arizona from pursuing criminal charges against prediction market platform Kalshi.
- The ruling, issued on 10 April, came after the CFTC and DOJ argued the Commodity Exchange Act grants the federal government exclusive jurisdiction over event contracts.
- The decision pauses a 20-count misdemeanor case brought by Arizona Attorney General Kris Mayes, who charged Kalshi in March with operating an unlicensed gambling business.
A US federal judge has temporarily barred Arizona from enforcing its gambling laws against prediction market operator Kalshi, halting a criminal prosecution that made the state the first in the country to file charges against the platform.
U.S. District Judge Michael Liburdi issued a temporary restraining order on 10 April, cancelling a Monday arraignment hearing that had been scheduled in Maricopa County Superior Court. The order came after the Trump administration intervened on Kalshi’s behalf.
State prosecutors had charged Kalshi with 20 misdemeanor counts of wagering, alleging the company was running an illegal gambling operation by accepting bets on political outcomes, college sports, and individual player performance. Kris Mayes, Arizona’s attorney general, filed the charges on 17 March.
Federal preemption argument
The judge found that the CFTC had sufficiently demonstrated that Kalshi’s “event contracts” fall within the Commodity Exchange Act’s definition of “swaps,” and that the act preempts Arizona law. The temporary restraining order remains in effect until 24 April, while the court considers whether to issue a longer-term preliminary injunction.
The ruling came days after the CFTC filed complaints against Arizona, Connecticut, and Illinois, seeking declaratory judgments that federal law grants the agency exclusive authority to regulate event contracts and seeking permanent injunctions blocking those states from enforcing local laws against designated contract markets.
Michael Selig, sole commissioner of the Commodity Futures Trading Commission, said:
“Arizona’s decision to weaponize state criminal law against companies that comply with federal law sets a dangerous precedent. And the court’s order today sends a clear message that intimidation is not an acceptable tactic to circumvent federal law.”
Richie Taylor, Communications Director at the Arizona Attorney General’s Office, said:
“The attorney general’s office disagrees with the court’s ruling and we will evaluate our next steps.”
Robert DeNault, head of enforcement at Kalshi, described the ruling as “a step in the right direction” in a post on X.
Contested classification
Kalshi maintains it is a financial marketplace rather than a gambling operation, arguing its customers engage in swaps with one another rather than betting against a house. The platform has operated as a CFTC-registered designated contract market since 2020.
Lawyers for the state contend Kalshi has marketed itself as a platform for sports and election betting, and that Arizona should be able to enforce its gambling laws accordingly.
The Arizona Indian Gaming Association and national tribal gaming groups filed a brief arguing Kalshi operates without the required state licences and siphons revenue from tribal and state government operators.
The broader litigation now spans roughly 20 federal and state actions across at least 14 states.
Courts have split sharply: a Tennessee federal court granted Kalshi a preliminary injunction in February 2026, finding a likelihood of success on its preemption arguments, while a Massachusetts state court the same month rejected that theory.
A federal appeals court also ruled last week that the CFTC holds exclusive jurisdiction over sports-related event contracts, in a case originating in New Jersey. A separate ruling ordered Kalshi to geofence Nevada after a court found its offerings closely resemble traditional sports betting.
Donald Trump Jr. serves as a paid strategic adviser to Kalshi and as an investor and advisory board member at rival Polymarket, through his venture capital firm 1789 Capital. Trump’s social media platform Truth Social is also developing its own cryptocurrency-based prediction market.
The forthcoming preliminary injunction hearing will be the next critical test. A durable ruling in favour of federal jurisdiction could remove the threat of state-by-state criminal enforcement for prediction market operators.
A state victory, by contrast, would encourage further prosecutions and add compliance costs that could reshape how platforms expand across the US.
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