A federal judge is letting Arizona press ahead with its gambling case against a federally regulated prediction market, rejecting an urgent bid from Kalshi to halt enforcement while the broader legal fight plays out.
In an order dated Wednesday (April 8), U.S. District Judge Michael T. Liburdi pointed to the tension between fast-moving tech and slower-moving regulation, writing that “technology often sprints faster than the law can keep pace.” He denied Kalshi’s requests for both a preliminary injunction and a temporary restraining order, clearing the way for state authorities to continue their case.
Kalshi’s trading platform allows users to buy and sell contracts tied to real-world outcomes such as elections and sports results. The company operates under federal oversight as a designated contract market with the Commodity Futures Trading Commission.
State regulators in Arizona began scrutinizing the company last year, which led to a cease-and-desist letter “requir[ing] that Kalshi cease gambling operations in Arizona.” Officials argue the contracts function as illegal wagers under state law, and prosecutors have since filed criminal charges.
Kalshi, however, has taken its fight to federal court, arguing that the Commodity Exchange Act gives the CFTC “exclusive jurisdiction” over its products. From the company’s perspective, that federal authority overrides any attempt by states to treat its markets as gambling. It asked the court to step in and stop Arizona from enforcing its laws during the case.
Why the judge refused to intervene in the Arizona case against Kalshi
Judge Liburdi focused on the Anti-Injunction Act, as federal courts are generally barred from interfering with ongoing state criminal proceedings, a restriction the order describes as “an absolute prohibition” unless narrow exceptions apply.
Kalshi tried to get around this by framing its request as targeting state officials rather than the state court itself. The judge dismissed that approach, writing the law “cannot be evaded” by aiming an injunction at prosecutors instead of the court process.
He also said none of the recognized exceptions fit here. Deciding whether federal law clearly overrides state regulation would require a deeper ruling on the merits, which the court has not yet made. He noted, too, that the federal government, despite backing related litigation over prediction markets, has not sought the same immediate relief in this case.
The decision leaves Arizona’s criminal case intact, with proceedings already underway in state court and an arraignment scheduled for April 13.
Beyond Arizona, the clash reflects a growing national fight over prediction markets. Kalshi has scored some support in other courts and drawn backing from federal agencies, while states and tribal groups continue to argue these products resemble unlicensed gambling. There are also lawsuits involving the CFTC and Department of Justice.
As the judge put it, the issue is whether the Commodity Exchange Act “protects modern prediction markets or if they are unlawful under Arizona’s gambling laws.” That answer will come later.
Featured image: Kalshi / Canva
