Federal Judge Temporarily Halts Arizona Criminal Case Against Prediction Market Kalshi

Arizona Becomes Battleground in High-Stakes Legal Battle Over Federal Versus State Authority

A federal judge in Phoenix has temporarily blocked the state of Arizona from enforcing criminal charges against Kalshi, a prediction market platform, in response to a motion filed by the U.S. Commodity Futures Trading Commission.

U.S. District Judge Michael Liburdi issued the temporary restraining order on Friday, ruling that Arizona cannot proceed with an arraignment of Kalshi that was scheduled for Monday, April 13. The order will remain in place until April 24.

The ruling comes after Arizona Attorney General Kris Mayes filed the state's first-ever criminal case against a prediction market operator on March 17, accusing Kalshi of operating an illegal gambling business and unlawfully allowing bets on elections.

Defendants are temporarily restrained and enjoined from enforcing AZ's gambling laws in any criminal or civil enforcement actions to any contracts listed on CFTC-regulated designated contract markets, the judge ruled in the temporary restraining order.

State vs. Federal Jurisdiction at Center of Dispute

The criminal charges involve 20 misdemeanor counts of wagering alleging that Kalshi accepted bets on political outcomes, college sports, and individual player performance. Arizona prohibits operating an unlicensed wagering business and betting on elections.

The state's legal team contends that 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 the company accountable for flouting state law.

Kalshi maintains it is a financial marketplace rather than a gambling operation. The company argues that its customers engage in swaps between one another instead of betting against the house, and that its activities are exclusively governed by federal regulation under the CFTC.

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.

Mixed Legal Outcomes Across States

Kalshi sued Arizona, Utah, and Iowa in attempts to stop anticipated state actions against the platform. Other states have taken some form of legal action against Kalshi, with mixed results.

Federal and state judges in Nevada and Massachusetts respectively issued early rulings in favor of states looking to ban Kalshi and its competitor Polymarket from offering sports betting in their states. Meanwhile, federal judges in New Jersey and Tennessee have ruled in favor of Kalshi.

Earlier this month, the federal government filed lawsuits against Connecticut, Arizona, and Illinois challenging the states' 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, according to reports. Trump's social media platform Truth Social is also launching its own cryptocurrency-based prediction market called Truth Predict.

Arizona Attorney General Maintains Stance

The Arizona Attorney General's Office declined to comment on Thursday regarding the ruling. A spokesperson for the office said, The attorney general's office disagrees with the court's ruling and we will evaluate our next steps.

Kalshi's enforcement head Robert DeNault posted on X that the ruling is a step in the right direction.

The case is being heard in Maricopa County Superior Court because the company is charged with state criminal violations. An arraignment was scheduled for Monday morning, but the Arizona Attorney General's Office said it will inform the court that it will not move forward with the case while the order is in place.

The federal judge granted the CFTC's motion two days after denying Kalshi's own motion for a preliminary injunction against the state, though the parties argued on different grounds. Liburdi also said he would not block any future enforcement because there was no evidence beyond the current case that future enforcement was imminent.

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Sources:

• https://www.coindesk.com/policy/2026/04/10/federal-judge-blocks-arizona-from-bringing-criminal-charges-against-kalshi
• https://ktar.com/arizona-news/judge-rejects-kalshi-bid/5845676/
• https://www.azfamily.com/2026/04/10/federal-judge-halts-arizona-criminal-case-against-kalshi/
• https://ktar.com/general-news/judge-bars-az-kalshi-regulation/5846123/