Arizona Judge Allows State to Prosecute Online Gambling Site Kalshi Despite Federal Regulation Claims
Agent
Federal Judge Denies Injunction in Criminal Charges Against Prediction Market Operator
A legal battle over state versus federal authority plays out in Maricopa County Superior Court
A federal judge has refused to block Arizona from prosecuting an online gambling site for violating state gaming laws, allowing Attorney General Kris Mayes to continue pursuing criminal charges against Kalshi.
In an opinion issued on April 8, U.S. District Court Judge Michael Liburdi acknowledged a legal conflict between Kalshi and the state over which laws take precedence. But he said that, for the moment, he would allow the Attorney General to continue pressing charges.
The case has drawn attention because it pits state gaming laws against federal regulation. Kalshi contends that its activities are regulated by the federal Commodity Futures Trading Commission, which trumps arguments by Mayes that state laws allow only regulated entities to take wagers — and only on sporting events.
The Charges
Mayes has charged Kalshi with four counts of illegal wagering on elections and 16 sports-related counts. The election charges are based on bets filed by an investigator from her office between December 2025 and February 2026.
One of the election wagers involved whether Andy Biggs would win the Republican Party primary in his bid for governor. Each of those election wagers carries a maximum penalty of $10,000.
The remaining 16 counts involved sports bets, ranging from the outcome of a women's basketball game between Arizona State University and the University of Arizona to whether Phoenix Suns star Devin Booker would score more than 25 points in a specific game against the Indiana Pacers. Each carries $20,000 penalties.
What Kalshi Does
Kalshi lets people bet on everything from political and social events to sports and weather. Arizonans logging into the Kalshi website can put money down on what they think will be the rate of the U.S. tariff on China on July 1, how high the unemployment numbers will go, and even whether a Dune movie will win an Oscar.
The price of buying a swap fluctuates depending on how many people bet on an individual outcome. This differs from traditional gambling because it involves prediction markets where participants can wager on future contingent events.
The Legal Conflict
Tied up in all of this is whether the various events that Kalshi customers can wager on fall under the definition of "swaps" within the federal Commodity Futures Act. That involves transactions in which people can agree to bet money on a future contingent event.
Liburdi, in a detailed 15-page ruling, said it is "premature" for him to rule on that question of what is a "swap" just yet. But what he did conclude is that while the case is pending in his court, he won't block the state case from pursuing its criminal charges.
The key, the judge explained, is something called the Anti-Injunction Act. It says that federal courts can't block proceedings in state court except in narrow exceptions. More to the point, Liburdi said that act applies as long as there is a case in state court, which is the case here.
Federal Intervention
What could complicate all that is that this is no longer just a legal dispute between Kalshi and the Attorney General's Office. The Commodity Futures Trading Commission has filed its own suit in federal court. In that case, now consolidated with Kalshi's original lawsuit, the agency is siding with the company and urging Liburdi to rule that any action by the Attorney General is preempted.
Liburdi, however, said that for the moment, the intervention of the Trump administration does not change his belief that Mayes is free to pursue Kalshi in state court. But he did agree to hear arguments from attorneys for the CFTC that they are entitled to block Mayes case, even if Kalshi is not.
Next Steps
The company faces its first hearing April 13 in Maricopa County Superior Court. A spokesman for Mayes declined to say which way the investigator bet on the election wagers. But he said each of those election wagers carries a maximum penalty of $10,000.
A spokesman for Mayes said late April 8 that the office's lawyers were analyzing the ruling. "But we believe the court made the right decision," he said.
There was no immediate response from Kalshi.
Why This Matters
This case highlights the ongoing tension between state and federal authority in the emerging world of online betting and prediction markets. As digital gambling platforms expand, the question of which laws govern these platforms becomes increasingly important for Arizona residents and the state government.
The outcome could set important precedents for how states can enforce their gaming laws against platforms that claim federal protection. It also raises questions about what kinds of events are appropriate for wagering and whether prediction markets operate under different rules than traditional sports betting.
Sources:
Arizona Capitol Times, "Kalshi faces criminal charges in Arizona as judge denies injunction," April 9, 2026: https://azcapitoltimes.com/2026/04/12/kalshi-faces-criminal-charges-in-arizona-as-judge-denies-injunction/