Judge Blocks Arizona Criminal Case Against Kalshi

A federal judge in Arizona temporarily barred the state from pursuing criminal charges against prediction-market operator Kalshi after granting a temporary restraining order for the Commodity Futures Trading Commission. U.S. District Judge Michael T. Liburdi issued the order on April 10 and prohibited Arizona from enforcing its gambling statutes or bringing civil or criminal actions against Kalshi until April 24.

In a four-page order, Judge Liburdi found the CFTC met the four-part test for emergency relief and is likely to prevail on its main claim that federal commodities law preempts Arizona’s gaming statutes. The court said the Commodity Exchange Act’s definition of a ‘swap’ is broad enough to cover event contracts offered by prediction markets.

The judge rejected Arizona’s argument that federal courts must abstain under Younger because the United States is a party to the case. He also rejected the state’s laches defense, saying the short delay between Arizona’s enforcement action and the CFTC lawsuit was reasonable and that federal agencies are not subject to that equitable bar. The court found allowing state enforcement to proceed would likely violate the Supremacy Clause and cause irreparable harm.

The order follows a Third Circuit decision last week that upheld a preliminary injunction blocking New Jersey from enforcing its cease-and-desist orders against Kalshi.

Arizona was the first state to bring criminal charges. The CFTC has filed lawsuits against Arizona, Connecticut and Illinois seeking declaratory judgments that it has exclusive authority over event contracts and requesting permanent injunctions against state enforcement. The temporary restraining order applies only to Arizona’s criminal proceedings while the court considers the CFTC’s motion for a preliminary injunction.

CFTC Chair Mike Selig posted on X that Arizona attempted to ‘weaponize state criminal law’ against companies that comply with federal rules and welcomed the court’s order. Kalshi’s head of government relations, Robert DeNault, posted on X expressing support for the CFTC’s assertion of jurisdiction and appreciation for the court’s action.

The restraining order expires on April 24. The court will consider the CFTC’s motion for a preliminary injunction before that date. Separate lawsuits in Illinois and Connecticut are pending at early stages and have not produced similar emergency relief.

While the federal case continues, Arizona is barred from enforcing its gambling laws against Kalshi under the terms of the temporary restraining order.