Federal Judge Halts Arizona's Criminal Prosecution of Prediction Market Kalshi
A federal judge has temporarily halted Arizona's criminal prosecution of Kalshi, a prediction market operator, in a significant victory for the company backed by the Trump administration's Commodity Futures Trading Commission. U.S. District Judge Michael Liburdi issued a temporary restraining order Friday that bars Arizona from enforcing its gambling laws against Kalshi and pauses the state's case, according to TechCrunch and reporting on the decision.
The ruling came just days after the same judge had denied Kalshi's initial bid to stop Arizona's prosecution, marking a sharp reversal in the legal battle. The order also canceled a Monday arraignment hearing that had been scheduled for the company. Judge Liburdi determined that the CFTC had "sufficiently shown" that Kalshi's "event contracts" fall within the Commodity Exchange Act's definition of "swaps," and that federal law likely preempts Arizona's state gambling statutes.
Arizona's Attorney General Kris Mayes had charged Kalshi with 20 misdemeanor counts of wagering, alleging the company operates an illegal gambling business without a state license. The charges stem from Kalshi's acceptance of bets on political outcomes, college sports, and individual player performance. State prosecutors maintain that Kalshi is running an unlicensed gambling operation, directly contradicting the company's assertion that it operates as a regulated financial marketplace under federal oversight.
The CFTC framed the ruling as a rebuke to state overreach, with Chairman Michael S. Selig stating that "Arizona's decision to weaponize state criminal law against companies that comply with federal law sets a dangerous precedent." The federal agency emphasized that the court's order "sends a clear message that intimidation is not an acceptable tactic to circumvent federal law." The agency has also filed similar suits seeking to stop comparable cases from moving forward in Connecticut and Illinois.
Arizona's Attorney General's office pushed back against the decision. "The attorney general's office disagrees with the court's ruling, and we will evaluate our next steps," said a spokesperson for the office, signaling that the state may pursue further legal action. The temporary nature of the restraining order leaves the underlying jurisdictional dispute unresolved, setting the stage for continued legal battles over whether federal or state law governs prediction market operators.