A federal judge has temporarily blocked Arizona from moving forward with its criminal case against Kalshi, giving the prediction market operator another win in its fight with state gambling regulators. The order came after the Commodity Futures Trading Commission requested that the US District Court in Arizona halt the state’s enforcement of its gambling laws against CFTC-regulated designated contract markets.
The ruling gives Kalshi near-term protection in one of the clearest state-level challenges to event contracts so far. It also lends weight to the argument that these markets should be governed by federal derivatives law rather than state betting rules.
The judge sided with the CFTC’s main argument
The CFTC said on April 10 that the court granted a temporary restraining order blocking Arizona from continuing its criminal action against CFTC-regulated contract markets. Chairman Michael S. Selig said the agency stepped in to preserve the status quo while the larger legal fight over federal authority plays out.
AP reported that Judge Michael Liburdi said the CFTC had made a sufficient showing that event contracts fall within the Commodity Exchange Act’s definition of swaps and had shown a reasonable chance of succeeding on its argument that federal law preempts Arizona’s gambling laws in this context. The judge’s order also cancelled Kalshi’s scheduled arraignment in the state case.
Arizona pushed the dispute into criminal law
Arizona Attorney General Kris Mayes filed charges against Kalshi on March 17, accusing the company of running an illegal gambling business and unlawfully taking bets on elections. Reuters said the case was the first criminal prosecution brought by a state against Kalshi as the fight over prediction markets expanded.
Arizona has argued that federal law does not wipe out the state’s traditional authority over sports betting and gambling. Kalshi has continued to argue the opposite, saying its contracts are financial swaps traded on a federally regulated market, not wagers offered by a sportsbook or casino.
The wider fight is about who controls event contracts
This ruling does not settle the case. It is a temporary block, not a final decision on the merits. Even so, it comes just days after the CFTC said it had sued Arizona, Connecticut, and Illinois to stop those states from applying gambling laws to federally regulated prediction markets.
For Kalshi and the wider prediction market sector, the immediate benefit is time and room to keep operating while federal courts sort out where state gaming law ends and CFTC authority begins. For states trying to treat event contracts as gambling, the order is another sign that the fight is moving into federal court.
Categories:
Fhumulani Lukoto
Cryptocurrency Journalist
Fhumulani Lukoto holds a Bachelors Degree in Journalism enabling her to become the writer she is today. Her passion for cryptocurrency and bitcoin started in 2021 when she began producing content in the space. A naturally inquisitive person, she dove head first into all things crypto to gain the huge wealth of knowledge she has today. Based out of Gauteng, South Africa, Fhumulani is a core member of the content team at Coin Insider.