Arizona Prosecution of Kalshi Prediction Market Advances After Judge Denies Injunction Bid

Federal Judge Blocks Kalshi's Legal Challenge, Case Moves Forward With Federal Hurdle Looming

PHOENIX — A federal judge denied an attempt by Kalshi to block the Arizona Attorney General's criminal prosecution of the prediction market platform, sending the case forward with a high-stakes federal challenge waiting in the wings.

U.S. District Court Judge Michael Liburdi issued the order Wednesday after a lengthy hearing last Friday, ruling that the Anti-Injunction Act bars Kalshi from obtaining preliminary relief against the state.

"The Court finds that the AIA applies and the preliminary injunction Kalshi requests does not fall within any exception to the application of the AIA. The Court is barred by statute from issuing the injunction, so it must deny Kalshi's requests for preliminary relief," Judge Liburdi wrote in his decision.

The First State to File Criminal Charges

Arizona Attorney General Kris Mayes filed a first-of-its-kind criminal case against Kalshi on March 17, alleging the platform is operating an illegal gambling business and allowing betting on elections. The state has filed 20 criminal counts against the prediction market operator.

Kalshi filed its preemptive lawsuit against Arizona on March 12, arguing that its activities are regulated exclusively by the federal Commodity Futures Trading Commission, not state gambling laws.

Counsel for Kalshi pointed to a May 21, 2025, cease-and-desist letter sent to the company by the Arizona Department of Gaming as evidence that the state would pursue legal action if the platform did not conclude its business in Arizona.

What Exactly Is a Bet?

The core legal conflict centers on a simple but contested question: what constitutes a wager?

Arizona and a growing number of states argue that contracts on sports outcomes function like traditional bets and should be regulated as gambling with licensing requirements, age restrictions, and consumer protections.

Federal regulators see it differently. In a filing late Tuesday, the Commodity Futures Trading Commission and Department of Justice asked a federal court to block Arizona from enforcing its gambling laws against Kalshi.

"Arizona's decision to weaponize preempted state criminal law against companies that comply with a comprehensive federal regime sets a dangerous precedent," said CFTC Chairman Michael S. Selig in a statement. "The CFTC is committed to vigorously defending its exclusive authority over prediction markets. We are asking the court to send a clear message that intimidation is not an acceptable tactic to circumvent federal law."

Federal Challenge Scheduled for Friday

The federal government argues that contracts tied to sports, elections and other real-world events are financial derivatives known as swaps, placing them under federal oversight via the Commodity Exchange Act.

Judge Liburdi will hear arguments on the DOJ and CFTC's request this Friday at the Phoenix federal courthouse. If courts accept the CFTC's position, prediction markets could operate nationwide under a single federal framework, effectively bypassing the state-by-state system that governs sports betting today.

If they reject it, the products could be forced into existing gambling regimes or shut down altogether in key jurisdictions.

Arraignment Set for April 13

Despite the federal challenge, the state's criminal case moves forward. Kalshi faces arraignment on the 20 charges on April 13 at the Phoenix federal courthouse.

The state of Arizona is the first jurisdiction to file criminal charges against a prediction market platform. An arraignment on state charges was scheduled for April 13, according to state officials.

Kalshi's Legal Position

Kalshi contends that its platform operates like the Chicago Mercantile Exchange, where commodities such as corn, cattle and oil are traded on futures contracts.

In its filing, the company argued it was not seeking to block the approaching arraignment but was seeking to bar prosecutors from the case entirely. Judge Liburdi said that did not matter, and the law treated the two requests as the same.

"But the exception to the AIA applies only 'to injunctions issued at the request of the United States,' and the question before this Court is whether to grant Kalshi's request for a preliminary injunction. Although the basis for granting Kalshi preliminary injunctive relief would be largely identical to the basis for granting a permanent injunction, the federal government has not yet requested the preliminary relief that this Court is assessing. So the Court will not apply the exception here," Liburdi wrote.

The Bigger Picture

The legal fight has been building for months and is now starting to produce conflicting rulings. A federal appeals court in New Jersey recently sided with Kalshi, finding that its sports contracts are presumptively allowed under federal law unless the CFTC intervenes.

Courts in other jurisdictions have been more receptive to state arguments, allowing enforcement actions to move forward.

For now, the federal government is taking an expansive view of its authority, arguing that a contract on the Super Bowl is not fundamentally different from one tied to oil prices or interest rates.

"The U.S. government is making its clearest case yet that betting on sports can be regulated as finance, not gambling," CoinDesk reported. "If courts ultimately accept the CFTC's position, prediction markets could operate nationwide under a single federal framework, effectively bypassing the state-by-state system that governs sports betting today."

The outcome could determine whether prediction markets operate nationwide under a single federal framework or remain subject to a patchwork of state gambling regimes.

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Sources

1. Judge rejects bid to stop Arizona's prosecution of Kalshi on wagering charges — AP News: https://apnews.com/article/arizona-kalshi-criminal-charges-prediction-markets-gambling-563fbd63ded38faafc1a36b0382f7894

2. Judge denies Kalshi's effort to stop Arizona criminal case as federal hurdle awaits — Arizona's Family: https://www.azfamily.com/2026/04/09/judge-denies-kalshis-effort-stop-arizona-criminal-case-federal-hurdle-awaits/

3. CFTC presses case that sports betting is finance, seeks to block Arizona enforcement — CoinDesk: https://www.coindesk.com/policy/2026/04/09/cftc-presses-case-that-sports-betting-is-finance-seeks-to-block-arizona-enforcement/

4. Arizona can pursue charges against Kalshi, judge rules — CDC Gaming: https://cdcgaming.com/brief/arizona-can-pursue-charges-against-kalshi-judge-rules/

5. Arizona Judge Denies Kalshi's Motion For Preliminary Injunction — SportsBettingDime: https://www.sportsbettingdime.com/news/betting/arizona-judge-denies-kalshis-motion-for-preliminary-injunction/