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Kalshi’s bid to stop Arizona from pursuing a criminal case against the prediction market operator was rejected by a federal judge, a decision that keeps the state prosecution on track while the broader legal fight over prediction markets continues.
In a decision issued Wednesday, U.S. District Judge Michael Liburdi denied Kalshi’s request for an order barring Arizona prosecutors from moving forward with a criminal case. Liburdi also denied a request for a ruling saying federal law trumps Arizona’s gambling laws, saying it was too early in the case for him to decide that issue.
Arizona’s Attorney General’s Office charged Kalshi with 20 misdemeanor counts of wagering, alleging the company accepted bets tied to political outcomes, college sports and individual player performance. The case represents what the lawsuit filings and charging decisions have framed as a new front in a high-stakes dispute over whether prediction markets should face the same rules as other gambling operations.
The criminal charges mark the first state prosecution against Kalshi, according to the Associated Press reporting. Arizona is also the first state to have filed charges, the reporting said, and the allegations include claims that the company operated an unlicensed wagering business and accepted wagers on elections.
Kalshi, which argues its platform is a financial marketplace rather than a gambling operation, has maintained that its contracts are structured differently from traditional wagering. The company has described its model as allowing customers to buy and sell “Yes” or “No” contracts tied to the probable outcome of an event, and said customers engage in “swaps” between one another instead of betting against a “house.”
Kalshi is pressing its broader legal challenges in federal court, arguing that it should be subject to federal oversight by the U.S. Commodity Futures Trading Commission rather than Arizona’s criminal gambling statutes. In a lawsuit filed just days before the criminal charges were announced, Kalshi contended that federal law preempts Arizona’s efforts to regulate its event contracts.
Kalshi’s attorneys have argued that the state filed the criminal charges in order to interfere with its federal case. Lawyers for the state, by contrast, said Kalshi has marketed itself as a platform for sports and election betting and that Arizona can enforce its gambling laws to hold the company accountable for what they allege is noncompliance with state rules.
The case is being handled in county court because the company is charged under state criminal violations, AP reported. An arraignment is scheduled for Monday for Kalshi in Maricopa County Superior Court, where the criminal proceedings will move forward despite the federal judge’s refusal to stop them.
The legal battle over prediction markets has produced mixed early results in other places, including early rulings in Nevada and Massachusetts that favored state efforts to bar Kalshi and Polymarket from offering sports betting, alongside rulings in favor of Kalshi by federal judges in New Jersey and Tennessee. Federal lawsuits have also been filed challenging state efforts to regulate prediction market operators, including litigation reported earlier this month involving Connecticut, Arizona and Illinois.
The Associated Press reported that it emailed Kalshi for comment on the decision and that Attorney General Kris Mayes’ office declined to comment on Thursday. This decision also comes amid ongoing federal support for prediction markets, with AP citing the Trump administration’s backing of the platforms and the role of Trump-linked advisers and investments tied to related market ventures.