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Kalshi has secured a key legal win in Arizona after a federal judge blocked the state from pursuing charges against the prediction market platform.
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Arizona cannot use state gambling law to prosecute Kalshi over contracts traded on a federally regulated exchange, according to a new ruling from U.S. District Court Judge Michael Liburdi.
The decision gives Kalshi relief after Arizona Attorney General Kris Mayes charged the platform in March with 20 misdemeanor counts. Mayes argued that Kalshi broke state law by offering election contracts in Arizona. Her office also challenged sports event contracts, saying they violated Arizona gambling rules.
Liburdi sided with Kalshi on Tuesday and said the Commodity Futures Trading Commission, not Arizona regulators, has authority over prediction market contracts listed on CFTC regulated markets. He wrote:
“Here, the Court concludes that federal law preempts state gambling laws insofar as they seek to regulate derivatives exchanged on markets regulated by the CFTC,”
The ruling came one month after Liburdi denied a temporary restraining order requested by Kalshi. After further review, he accepted the core argument from Kalshi: state gambling rules cannot override the federal structure for designated contract markets.
Liburdi also pointed to the broad reach of CFTC oversight. He wrote:
“These provisions regulate every aspect of designated contract markets, including what contracts may be listed and how trading may be conducted, leaving no room for state regulation,”
He added:
“That comprehensive framework is so pervasive that it forecloses parallel state regulation of designated contract market trading.”
The preliminary injunction blocks Mayes from prosecuting Kalshi on the 20 misdemeanor charges. She can appeal, but no appeal has been filed so far.
For Kalshi, the Arizona ruling adds support to the argument that prediction markets operate under federal derivatives law rather than state gambling law. That legal line has become central as state officials question contracts tied to sports, elections, and other public events.
Liburdi also noted the practical issue for a company active across all 50 states. A trading exchange would face conflicting local rules if every state applied its own gambling law to federally regulated contracts. He wrote:
“The result would be the inconsistent regulatory patchwork that Congress intended to avoid,
“Because Arizona’s gambling laws stand as an obstacle to federal regulation, those laws are preempted.”