Judge blocks Arizona enforcement of Kalshi

A federal judge in Arizona granted the Commodity Futures Trading Commission a preliminary injunction and extended a temporary restraining order, preventing Arizona from bringing criminal or civil enforcement actions against Kalshi and other CFTC-regulated exchanges while the federal case continues. U.S. District Judge Michael Liburdi issued a 17-page order on Tuesday that halts state enforcement tied to Kalshi’s sports-event contracts.

Liburdi addressed whether Kalshi’s sports-event contracts fall within the Commodity Exchange Act definition of “swaps.” He concluded the contracts do qualify, writing, “The statutory definition of swap therefore reaches how an event unfolds, not just whether it happens.” The order says Congress drafted the swap definition to include outcomes tied to potential financial, economic or commercial consequences.

The judge rejected Arizona’s argument that sports outcomes lack the economic significance required for federal regulation. He pointed to other measures, such as temperature and precipitation, that regulators have treated as swaps and said similar financial exposure can exist for parties hedging risks tied to sports or election results.

On preemption, Liburdi wrote that both field and conflict preemption likely apply. He wrote that Congress established a federal framework for swaps and futures traded on designated contract markets and granted the CFTC exclusive authority over that field. The order adds that a congressional directive for the CFTC to review event contracts tied to activities like gaming places those contracts under federal oversight, stating, “By directing the CFTC to review event contracts and prohibit those contrary to the public interest, Congress placed event contracts under the CFTC’s exclusive authority.”

The judge also said Arizona’s enforcement efforts would conflict with Congress’s goal of preserving unified national derivatives markets. Allowing states to prosecute designated contract market operators over event contracts, the order said, would invite a fragmented state-by-state system and leave operators subject to multiple regulators.

Liburdi signaled he is inclined to stay the Arizona case while consolidated appeals in the Ninth Circuit proceed. Those appeals involve Kalshi, Crypto.com and Robinhood and raise similar preemption questions against Nevada. The judge ordered briefings on a possible stay by May 15, with responses due May 22, and cited a Third Circuit decision that had previously ruled in favor of Kalshi on related issues.

The dispute began after the Arizona Department of Gaming sent Kalshi a cease-and-desist letter in May 2025. Kalshi sued in federal court in March 2026 arguing the Commodity Exchange Act preempts Arizona’s gambling laws for federally regulated event contracts. A week later Arizona filed a 20-count criminal information in state court. The CFTC sued Arizona in April and obtained the initial temporary restraining order that the preliminary injunction now extends.

The preliminary injunction does not resolve the underlying legal dispute on the merits. It prevents Arizona from enforcing gambling laws against Kalshi and similar exchanges while courts decide whether federal law preempts state enforcement.