Arizona Attorney General Kris Mayes filed criminal charges against Kalshi, accusing the company of operating an illegal gambling business in the state without a license and taking prohibited bets on elections.
But Arizona’s criminal case is now blocked in federal court.
U.S. District Judge Michael Liburdi granted a preliminary injunction against Arizona officials in early May, preventing the state from pursuing criminal or civil enforcement against Kalshi and other CFTC-regulated exchanges while the federal case proceeds. The ruling extended an earlier temporary restraining order that had already paused Arizona’s prosecution.
The 20-count criminal information names KalshiEx LLC and Kalshi Trading LLC, the companies behind the prediction markets platform.
Arizona alleges that Kalshi accepted wagers from state residents on a wide range of events barred under state law, including professional and college sports, player proposition bets, and political outcomes.
These allegations specifically mention bets placed on the 2028 presidential race, the 2026 Arizona governor’s race, the 2026 Arizona Republican gubernatorial primary, and the 2026 Arizona secretary of state race.
The federal Commodity Futures Trading Commission regulates Kalshi and other prediction markets.
Federal Judge Sides With CFTC
The latest ruling is a major legal win for Kalshi and the CFTC, but it does not end the national fight over prediction markets.
Liburdi concluded that the Commodity Exchange Act likely gives the CFTC exclusive jurisdiction over event contracts traded on federally regulated designated contract markets, including Kalshi. The court also found that federal law likely preempts Arizona’s attempt to apply state gambling laws to those contracts.
That means Arizona’s criminal prosecution is blocked while litigation continues. It does not mean the public-health or consumer-protection concerns around sports and election betting have disappeared.
The judge also signaled that the Arizona case could be paused while the Ninth Circuit considers related prediction-market disputes involving Nevada, Crypto.com, Robinhood, and Kalshi.
Kalshi & CFTC Respond to Arizona
“Sadly, a state can file charges on paper thin arguments,” Kalshi said in a statement. “As other courts have recognized and the CFTC affirms, Kalshi is subject to federal jurisdiction and it should not be overseen by a patchwork of inconsistent state laws.”
The CFTC also escalated the fight. In April, the CFTC and the U.S. Department of Justice sued Arizona, arguing that the state was trying to regulate markets under the CFTC’s exclusive federal authority. The agency also sought a temporary restraining order and preliminary injunction to halt Arizona’s enforcement efforts.
“The Arizona Attorney General today filed criminal charges against one of our registered exchanges related to prediction markets. This is a jurisdictional dispute and entirely inappropriate as a criminal prosecution. The CFTC is watching this closely and evaluating its options.”
Kalshi Is Gambling, Says Arizona
“Kalshi may brand itself as a ‘prediction market,’ but what it’s actually doing is running an illegal gambling operation and taking bets on Arizona elections, both of which violate Arizona law,” Mayes said in a statement. “No company gets to decide for itself which laws to follow.”
The case centers on an ongoing legal dispute over whether prediction markets fall under online gambling regulations or represent financial products.
In response, Kalshi has repeatedly argued that its contracts fall under federal commodities regulation, not state betting rules.
Mayes also criticized Kalshi’s legal strategy. On March 12, Kalshi sued Arizona in federal court, continuing a pattern that has drawn scrutiny as the company clashes with multiple states.
Arizona’s argument remains straightforward: Kalshi may call its product a financial exchange, but the state says it still allows people to wager on sports, player outcomes, and elections.
Other Cases Used Against Kalshi
“Kalshi is making a habit of suing states rather than following their laws,” Mayes said, noting recent cases involving Iowa, Utah, and Ohio.
The Arizona attorney general’s office also pointed to a setback for Kalshi in Ohio, where a federal judge denied the company’s request for a preliminary injunction.
That Ohio fight has continued. In late April, the Sixth Circuit declined to give Kalshi emergency protection from Ohio enforcement while the appeal moved forward, though the court fast-tracked the case.
Ohio also fined Kalshi a record $5 million.
The national picture is now mixed.
Kalshi has scored major wins in Arizona and New Jersey. In New Jersey, the Third Circuit sided with Kalshi at the preliminary injunction stage, finding that sports-event contracts likely qualify as swaps under the Commodity Exchange Act and that federal law likely preempts New Jersey’s gambling laws.
But other courts and states remain skeptical. In Massachusetts, the state’s highest court recently appeared open to allowing regulators to block Kalshi from offering sports-event contracts without a gaming license. During oral arguments, justices questioned how Kalshi’s sports contracts differ from traditional sports betting.
Elsewhere, for example, in Minnesota, policymakers have introduced legislation to criminalize prediction markets like Kalshi. New York is also considering similar legislation to regulate prediction markets.
Bottom Line
Arizona’s criminal charges against Kalshi marked the most aggressive state action yet against a prediction market company.
For now, a federal judge has blocked Arizona from moving forward.
That is a major procedural win for Kalshi and the CFTC, but it does not settle the bigger legal questions that may reach the Supreme Court.
