Federal Judge Blocks Arizona Criminal Charges Against Prediction Market Kalshi

A federal judge on Friday temporarily blocked Arizona from enforcing its gambling laws against predictive market operator Kalshi, halting criminal charges the state had filed against the company.

U.S. District Judge Michael Liburdi in the District of Arizona issued a temporary restraining order preventing Arizona from continuing its criminal case against Kalshi, siding with the Commodity Futures Trading Commission which sued to prevent states from regulating prediction markets.

The ruling means a Monday arraignment hearing for Kalshi has been called off. State prosecutors had alleged Kalshi was running an illegal gambling operation in violation of Arizona law.

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.

Arizona had announced the previous month it would file 20 criminal charges against Kalshi for offering what the state claimed were betting products in violation of Arizona law. The charges include misdemeanor counts of wagering for allegedly accepting bets on political outcomes, college sports and individual player performance.

The order was granted for two weeks pending a motion for a preliminary injunction which, if successful, would extend the temporary restraining order.

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, CFTC Chair Michael Selig said in a statement.

The Legal Battle

The CFTC sued Arizona and two other states arguing that prediction markets, otherwise known as event contracts, are swaps subject to the federal agency's supervision. It is a view that has seen largely mixed results in court.

State courts have often sided with states, such as when a Nevada state court ruled that the Gaming Control Board could temporarily block Kalshi while a broader case moves forward. Federal courts have had different results; the Third Circuit Court of Appeals ruled earlier this week that prediction markets are subject to CFTC rule.

Kalshi operates by allowing customers to buy and sell Yes or No contracts tied to the probable outcome of an event. The company maintains it is a financial marketplace rather than a gambling operation and should only have to answer to the federal Commodities Futures Trading Commission, not the state of Arizona.

Kalshi has said its product is different from gambling operations because Kalshi's customers engage in swaps between one another instead of betting against the house, the ruling explained.

State vs Federal Authority

The judge ruled that the federal Commodity Exchange Act grants the CFTC exclusive jurisdiction over the regulation of swaps traded or executed on Designated Contract Markets. Arizona proceeding with a state action might violate the Supremacy Clause, Liburdi said.

Earlier this month, the federal government filed lawsuits against Connecticut, Arizona and Illinois challenging their efforts to regulate prediction market operators. The Trump administration has so far backed the platforms. President Donald Trump's eldest son is an adviser for both Kalshi and Polymarket and an investor in the latter.

The attorney general's office disagrees with the court's ruling and we will evaluate our next steps, Richie Taylor, a spokesperson for the Arizona Attorney General's Office, said.

Robert DeNault, head of enforcement at Kalshi, said in a posting on X that the ruling is a step in the right direction.

Other states have taken some form of legal action against Kalshi. So far, the outcomes have been mixed. Federal and state judges in Nevada and Massachusetts issued early rulings in favor of states looking to ban Kalshi and its competitor Polymarket from offering sports being in their states, while federal judges in New Jersey and Tennessee have ruled in favor of Kalshi.

Arizona's First Crackdown

Arizona is the first state to file criminal charges against Kalshi. The state prohibits operating an unlicensed wagering business and betting on elections. The criminal charges mark a new front in a high-stakes legal battle over whether prediction markets should be subject to the same rules as gambling companies.

Kalshi sued Arizona, Utah and Iowa in attempts to stop anticipated state actions against the platform. It also contends 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.

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 to hold Kalshi accountable for flouting state law.

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Sources:

• https://www.coindesk.com/policy/2026/04/10/federal-judge-blocks-arizona-from-bringing-criminal-charges-against-kalshi
• https://apnews.com/article/arizona-kalshi-criminal-charges-prediction-markets-gambling-bb7cef24be5bd0d444bba670d2e41ceb
• https://www.wral.com/news/ap/bb7ce-judge-bars-arizona-from-regulating-prediction-market-operators-and-pauses-prosecution-of-kalshi/