Kalshi’s ability to operate prediction markets in Arizona hit a temporary pause after a federal judge issued an order blocking Arizona from enforcing its gambling laws against the company, a move that also halted a state criminal case that prosecutors had brought. The ruling by U.S. District Judge Michael Liburdi meant Kalshi’s scheduled Monday arraignment was called off, according to the judge’s order described by the Associated Press.
Liburdi’s decision came as part of a lawsuit brought by the Trump administration in which the federal government challenged the state’s actions against Kalshi. State prosecutors have argued that Kalshi was running an illegal wagering operation, and the judge addressed those assertions through the lens of federal authority over certain financial instruments.
In the court order, Liburdi said the Commodity Futures Trading Commission had shown event contracts are sufficiently within the Commodity Exchange Act’s definition of “swaps” and that the federal statute appeared likely to preempt Arizona’s gambling law enforcement. The order said the Commodity Exchange Act grants the CFTC “exclusive jurisdiction” over the regulation of swaps traded or executed on designated contract markets, framing the dispute as a conflict over who holds regulatory power.
Arizona prosecutors have charged Kalshi with 20 misdemeanor counts of wagering, an AP report said, alleging the company accepted bets tied to political outcomes, college sports and individual player performance. Arizona is the first state to file criminal charges against Kalshi, according to the report, and state law cited in the case prohibits operating an unlicensed wagering business and betting on elections.
Kalshi has maintained that it is operating a financial marketplace rather than a gambling business, and that its customers buy and sell “Yes” or “No” contracts tied to the probable outcome of events. The company has argued that its product should fall under the federal CFTC’s oversight rather than Arizona’s gambling statutes.
Liburdi previously rejected Kalshi’s attempt to block prosecutors from proceeding and also declined an earlier request for a ruling that would declare federal law automatically trumps Arizona’s gambling laws, the AP report said. The judge described that determination as too early in the case at the time, and the later order instead temporarily stopped enforcement while the federal lawsuit proceeds.
Richie Taylor, a spokesperson for the Arizona Attorney General’s Office, said, “The attorney general’s office disagrees with the court’s ruling and we will evaluate our next steps.” Kalshi’s head of enforcement, Robert DeNault, responded in a posting on X calling the decision “a step in the right direction,” while the CFTC’s chairman, Michael Selig, said in a statement that the court’s order sends “a clear message that intimidation is not an acceptable tactic to circumvent federal law.”
The wider dispute reflects a broader legal battle over whether prediction markets should be regulated as gambling companies or governed under federal derivatives rules. The AP report noted that courts in Nevada and Massachusetts had issued early rulings favoring states seeking to ban Kalshi and its competitor Polymarket from offering sports betting, while courts in New Jersey and Tennessee had ruled in favor of Kalshi, and it said the federal government had filed lawsuits challenging state efforts in other states as well.