The US District Court for the District of Arizona is blocking Arizona from pursuing criminal charges against federally regulated prediction market operators, following a request from the CFTC on Friday (10 April).
The order halts Arizona’s criminal case against Kalshi, a designated contract market overseen by the Commodity Futures Trading Commission (CFTC), while litigation continues.
CFTC Chairman Michael Selig said the ruling preserves the current regulatory framework and addresses what the agency views as misuse of state criminal statutes.
He added that Arizona’s approach risks setting a precedent that could undermine federal oversight.
Selig added: “Arizona’s decision to weaponise state criminal law against companies that comply with federal law sets a dangerous precedent, and the court’s order today sends a clear message that intimidation is not an acceptable tactic to circumvent federal law.”
The CFTC maintains that prediction markets qualify as swaps under the Commodity Exchange Act, placing them under exclusive federal jurisdiction.
That interpretation is part of the agency’s broader effort to block states from regulating companies operating within its framework.
The Arizona case forms part of a wider legal push by the CFTC, which has also filed complaints against Connecticut and Illinois.
The agency is seeking declaratory judgments affirming its authority over event contracts and permanent injunctions to stop state enforcement actions.
Only a temporary detour
A motion filed by Kalshi last week requested immediate relief to prevent Arizona from continuing its prosecution during the case over questions of its legality.
That motion was rejected by Judge Michael Liburdi, who later issued the subsequent decision on Friday following the CFTC’s request, suggesting the federal government’s intervention carried a higher legal weight than Kalshi’s private motion.
Arizona officials have disputed the CFTC’s position, however, arguing that federal law does not remove the state’s traditional authority over sports betting.
The state argues that platforms like Kalshi provide products similar to gambling that must be regulated as such. This debate reveals the emerging conflict as gambling regulations and finance regulations become more intertwined.
Arizona Attorney General Kris Mayes filed criminal proceedings against Kalshi on 17 March, claiming that it conducted an unlawful gambling enterprise by allowing people to bet on political elections.
Kalshi rejected the accusations and clarified that it operates differently from casinos and betting firms. The injunction stops the legal process as the courts consider the issue of jurisdiction.