Federal Court Halts Arizona Criminal Case Against Kalshi in First-of-Its-Kind Gambling Clash
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A federal judge in Phoenix has temporarily blocked the state of Arizona from pursuing its criminal case against the prediction market platform Kalshi, bringing the first of its kind clash between state gambling enforcement and federal financial regulation to a brief halt.
U.S. District Court Judge Michael Liburdi issued the order on Friday, April 10, after the Commodity Futures Trading Commission secured a temporary restraining order. The ruling stops the state from moving forward with 20 misdemeanor counts of illegal gambling filed by Arizona Attorney General Kris Mayes on March 17.
The April 13 arraignment scheduled in Maricopa County Superior Court will not proceed while the order is in place. The temporary restraining order runs through April 24.
Arizona Attorney General Kris Mayes had filed a first-of-its-kind criminal case against Kalshi on March 17, alleging the platform is operating an illegal gambling business and unlawfully allowing people to place bets on elections.
The Federal Government Sides With CFTC
The ruling came after a nearly two-hour hearing in federal court. Lawyers for the federal government and the CFTC argued that Arizona was attempting to invade federal sovereignty, while the attorney for Arizona argued that the CFTC does not have jurisdiction over state regulation of gambling or sportsbooks.
Judge Liburdi granted the CFTC's request, siding with the federal government and the CFTC. The judge found that the CFTC made a clear showing that it would likely succeed in proving Arizona's gambling laws are preempted by the federal Commodity Exchange Act.
The court finds that the CFTC has made a clear showing that it is likely to succeed on the merits of its claim that Arizona's gambling laws are preempted by the Commodity Exchange Act, the ruling said.
The judge noted that Arizona proceeding with state enforcement actions might violate the Supremacy Clause of the U.S. Constitution. He granted the temporary restraining order for two weeks while a motion for a preliminary injunction is pending.
Defendants are temporarily restrained and enjoined from enforcing Arizona's gambling laws in any criminal or civil enforcement actions on contracts listed on CFTC-regulated designated contract markets, the judge ruled.
High-Stakes Battle Over Financial Jurisdiction
The case marks the first criminal action by a state against a prediction market operator and has sweeping implications for the industry. Prediction markets, also known as event contracts, allow traders to bet on outcomes of real-world events, including elections and sports games.
Kalshi filed a lawsuit to stop the state before the charges were officially filed, arguing it is exclusively governed by the federal CFTC. The platform operates what it calls contracts on political outcomes, college sports and individual athlete performance.
Arizona Attorney General Kris Mayes had filed criminal charges against Kalshi in March, accusing the company of operating an illegal gambling business and facilitating bets on elections.
Federal Officials Warn Against State Overreach
CFTC Chairman Michael Selig welcomed the ruling, saying the regulator appreciated the court's decision.
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, Selig said in a statement.
The outcome could have far-reaching implications for other platforms like Polymarket and Robinhood, as regulators battle over the future of event-based trading in the United States.
State Officials Push Back
Arizona Attorney General Kris Mayes has maintained that federal law does not override the state's traditional authority to regulate gambling, including sports betting.
The case comes amid a broader federal challenge against state efforts in Arizona, Connecticut and Illinois. The outcome could reshape how states can enforce gambling laws in an increasingly digital financial landscape.
The judge's decision represents a temporary pause in what has become a high-stakes legal battle over financial jurisdiction, with implications that extend far beyond Arizona's borders.
Sources:
- https://www.azfamily.com/2026/04/10/federal-judge-halts-arizona-criminal-case-against-kalshi/
- https://www.benzinga.com/news/legal/26/04/51768188/arizonas-crackdown-on-kalshi-halted-as-federal-court-sides-with-cftc-in-fight-over-election-betting-an
- https://apnews.com/article/arizona-kalshi-criminal-charges-prediction-markets-gambling-bb7cef24be5bd0d444bba670d2e41ceb
- https://www.coindesk.com/policy/2026/04/10/federal-judge-blocks-arizona-from-bringing-criminal-charges-against-kalshi
- https://eu.usatoday.com/story/news/politics/arizona/2026/04/10/federal-judge-blocks-arizona-criminal-case-against-kalshi/89555593007/