Federal Judge Blocks Arizona Criminal Case Against Prediction Market Operator Kalshi

Federal Judge Sides with CFTC in Battle Over State Gambling Laws

A federal judge in Phoenix has temporarily blocked the state of Arizona from pursuing criminal charges against Kalshi, a prediction market platform, in a high-stakes legal battle over whether state gambling laws can be enforced against companies that comply with federal regulations.

U.S. District Judge Michael Liburdi granted a temporary restraining order on Friday that prevents Arizona from holding the scheduled arraignment for Kalshi on Monday, April 13. The order will remain in place through April 24.

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 came in response to a motion from the Commodity Futures Trading Commission (CFTC), which argued that Arizona was attempting to enforce state law against a federal regulatory scheme.

First State to File Criminal Charges

Arizona Attorney General Kris Mayes filed the state's first criminal case against a prediction market operator on March 17, alleging that Kalshi is running an illegal gambling operation and allowing bets on elections. The charges consist of 20 misdemeanor counts of wagering for allegedly accepting bets on political outcomes, college sports and individual player performance.

Kalshi maintains that it operates a financial marketplace rather than a gambling platform. The company argues its customers engage in "swaps" between one another instead of betting against the house, and that it should only answer to the federal CFTC, not the state of Arizona.

Federal Government Wins Key Victory

During the nearly two-hour hearing, lawyers for the federal government argued that Arizona was "attempting to invade federal sovereignty," while the attorney for Arizona contended that the CFTC does not have jurisdiction into Arizona and its regulation of gambling or sportsbooks.

Judge Liburdi sided with the federal government, ruling that the CFTC showed enough reason that it has jurisdiction over Kalshi and therefore state gambling laws don't apply. The judge also said the CFTC "has clearly shown that it will suffer irreparable harm absent an injunction."

The ruling marks an important victory for the federal government. CFTC Chair Mike Selig welcomed the decision, calling Arizona's decision to "weaponize state criminal law against companies that comply with federal law" as setting a "dangerous precedent."

I welcome the Court's order today that sends a clear message: these cases raise important issues that must be resolved before states seek to enforce state

Mixed Results in Other States

This is not the only state to challenge Kalshi. The company has sued Arizona, Utah and Iowa in attempts to stop anticipated state actions. So far, the outcomes have been mixed.

Federal and state judges in Nevada and Massachusetts issued early rulings favoring states, blocking Kalshi temporarily while broader cases moved forward. However, the Third Circuit Court of Appeals ruled earlier this week that prediction markets are subject to CFTC rules, leaving it up to the CFTC's discretion on whether it wants to block providers from offering sports-related products.

What Is Kalshi?

Kalshi operates by allowing customers to buy and sell "Yes" or "No" contracts tied to the probable outcome of an event. The company says its product is different from gambling operations because Kalshi's customers engage in "swaps" between one another instead of betting against the "house."

Kalshi argues that shutting down its ability to offer event contracts would threaten its viability, undermine confidence in the integrity of its platform and cause other problems for the business. The company contends that Arizona filed the criminal charges to interfere with its lawsuit challenging the state's authority.

Next Steps

The judge's temporary restraining order runs through April 24. A pending motion for a preliminary injunction could extend the temporary restraining order if granted. The Arizona Attorney General's Office has said it will inform the court Monday that it will not move forward with the case while the order is in place.

The case raises fundamental questions about the power of state versus federal authorities in regulating emerging financial technologies and whether states can use criminal law to challenge federal regulatory schemes.

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Sources

• AZfamily: Federal judge halts Arizona criminal case against Kalshi - https://www.azfamily.com/2026/04/10/federal-judge-halts-arizona-criminal-case-against-kalshi/
• CoinDesk: Federal judge blocks Arizona from bringing criminal charges against Kalshi - https://www.coindesk.com/policy/2026/04/10/federal-judge-blocks-arizona-from-bringing-criminal-charges-against-kalshi/
• KJZZ: Judge rules Arizona can't regulate prediction market operators, halts Kalshi case - https://www.kjzz.org/business/2026-04-10/judge-rules-arizona-cant-regulate-prediction-market-operators-halts-kalshi-case/
• AP News: Judge bars Arizona from regulating prediction market operators and pauses prosecution of Kalshi - https://apnews.com/article/arizona-kalshi-criminal-charges-prediction-markets-gambling-bb7cef24be5bd0d444bba670d2e41ceb