Federal Judge Blocks Arizona Criminal Case Against Kalshi
Posted on: May 6, 2026, 04:21h.
Last updated on: May 6, 2026, 04:21h.
- Federal judge rules Kalshi contracts likely fall under federal derivatives law
- Arizona blocked from pursuing criminal gambling case against Kalshi platform
- Ruling intensifies nationwide legal battle over sports prediction markets
A federal judge has blocked Arizona from enforcing its gambling laws against the prediction-market platform Kalshi while the legal fight over the future of event-based trading unfolds nationwide.
In a 17-page order issued Monday, U.S. District Judge Michael T. Liburdi granted a preliminary injunction preventing Arizona regulators and prosecutors from pursuing criminal or civil enforcement actions against Kalshi over its sports and event contracts.
In March, Arizona launched the first criminal prosecution brought by a state against a CFTC-registered prediction-market operator when it filed a 20-count criminal information against Kalshi.
The complaint accuses the company of accepting bets on political outcomes, college sports, and individual player performance in violation of state gambling laws.
States Vs Kalshi
Liburdi’s ruling converts a temporary restraining order issued in April into a longer-term preliminary injunction blocking Arizona’s enforcement action against Kalshi.
The ruling is one of the strongest yet in favor of the company and its ongoing battle with state gaming regulators, who argue it is operating an unlicensed sportsbook under the guise of a federally regulated financial exchange.
Kalshi, which is overseen by the Commodity Futures Trading Commission (CFTC), allows users to trade contracts tied to future events, including elections, economic indicators and sports outcomes.
Liburdi concluded that the contracts likely qualify as “swaps” under the Commodity Exchange Act, placing them within the CFTC’s “exclusive jurisdiction.”
The Court concludes that federal law preempts state gambling laws insofar as they seek to regulate derivatives exchanged on markets regulated by the CFTC,” Liburdi wrote.
The judge rejected Arizona’s argument that sports outcomes are distinct from the “events” covered by federal commodities law. Instead, the opinion found that contracts based on whether a team wins a game or a candidate wins an election fit comfortably within Congress’ broad definition of swaps tied to future occurrences with potential economic consequences.
The decision leaned on federal preemption doctrine, concluding that Congress intended derivatives markets to operate under a unified national framework rather than a patchwork of state-by-state regulation.
Patchwork Regulation
Liburdi warned that if states could prosecute DCM operators like Kalshi, they would face “the prospect of fifty different regulators, each capable of restricting which contracts may be listed on each exchange.”
He also acknowledged that Kalshi’s contracts may resemble “gaming” in an ordinary sense. But he wrote that determining whether such contracts violate federal event-contract rules is the responsibility of the CFTC and not state gaming agencies.
The ruling comes amid a nationwide legal fight over prediction markets. Courts in different states have reached conflicting conclusions, while federal appeals courts are increasingly weighing in.
The opinion notes that the Third Circuit recently ruled in Kalshi’s favor in a similar dispute, while the Ninth Circuit is expected to issue its own decision soon.
For now, the injunction bars Arizona from bringing criminal charges, civil actions, subpoenas or investigative measures related to event contracts listed on CFTC-regulated exchanges. The state has not yet indicated whether it intends to appeal.
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