Judge bars Arizona from regulating prediction market operators and pauses prosecution of Kalshi - AP News

A banner for the prediction market platform Kalshi hangs from a building in Washington, Wednesday, April 1, 2026. (AP Photo/Allison Robbert, File)

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.”

“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.