Judge bars Arizona from regulating prediction market operators and
pauses prosecution of Kalshi
[April 11, 2026] PHOENIX
(AP) — A federal judge on Friday temporarily barred Arizona from
enforcing its gambling laws against predictive market operators and put
the brakes on a criminal wagering case that the state has filed against
Kalshi.
U.S. District Judge Michael Liburdi's ruling means a Monday arraignment
hearing for Kalshi has been called off. State prosecutors allege Kalshi
is running an illegal gambling operation. The order was issued in a
lawsuit filed by the Trump administration.
The judge's order said the federal Commodity Futures Trading Commission
had sufficiently shown that “event contracts” fall within the Commodity
Exchange Act's definition of “swaps,” and that it had demonstrated a
reasonable chance of success in showing that the act preempts Arizona
law.
“The Act grants the CFTC ‘exclusive jurisdiction’ over the regulation of
‘swaps,’” traded or executed on a Designated Contract Markets, the order
said.
Kalshi operates by allowing customers to buy and sell “Yes” or “No”
contracts tied to the probable outcome of an event.
The commission had sued Arizona in response to cease-and-desist letters
sent to Kalshi from state gambling regulators and the criminal charges
filed against the prediction market operator. The commission argued
Arizona is intruding on its exclusive federal power to regulate national
swaps markets.
Liburdi had previously denied Kalshi’s attempt to bar prosecutors from
moving forward with the case and declined a request from the company for
a ruling saying federal law trumps Arizona’s gambling laws. Liburdi said
it was too early in the case for him to rule on that issue.
State prosecutors have charged Kalshi with 20 misdemeanor counts of
wagering for allegedly accepting bets on political outcomes, college
sports and individual player performance.
Arizona, the first state to file criminal charges against Kalshi,
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 maintains it’s 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.
“The attorney general's office disagrees with the court's ruling and we
will evaluate our next steps,” said Richie Taylor, a spokesperson for
the Arizona Attorney General's Office.
Robert DeNault, head of enforcement at Kalshi, said in a posting on X
that the ruling is “a step in the right direction.”
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A banner for the prediction market platform Kalshi hangs from a
building in Washington, Wednesday, April 1, 2026. (AP Photo/Allison
Robbert, File)
 “Arizona’s decision to weaponize
state criminal law against companies that comply with federal law
sets a dangerous precedent,” Michael Selig, chairman of the
Commodity Futures Trading Commission, said in a statement. “And the
court’s order today sends a clear message that intimidation is not
an acceptable tactic to circumvent federal law.”
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.”
In a lawsuit filed just days before prosecutors leveled the criminal
charges, Kalshi argued federal law trumps Arizona’s efforts to
subject it to state statute. 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.
The company said Arizona filed the charges to interfere with its
lawsuit.
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.
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.
So far, the outcomes have been mixed. 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 being in their states, while 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 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. Trump’s social media
platform Truth Social is also launching its own cryptocurrency-based
prediction market called Truth Predict.
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