Kalshi won a court battle in Arizona that will keep the state from taking legal action against the prediction market platform.
Key Takeaways
- A U.S. District Court judge sided with Kalshi that it is regulated federally.
- The ruling keeps Arizona’s Attorney General from prosecuting Kalshi on 20 charges.
- CFTC Chair Michael Selig applauded the decision.
Judge Michael Liburdi, of U.S. District Court for the District of Arizona, ruled on Tuesday that the state law can’t supersede federally regulated trading exchanges that offer derivative contracts.
This ruling comes a month after Liburdi had sided with Arizona by denying a temporary restraining order filed by Kalshi. However, the judge agreed with Kalshi on Tuesday that the Commodity Futures Trading Commission, not state authorities, has jurisdiction over prediction markets.
Enjoying Covers content? Add us as a preferred source on your Google account“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,” Liburdi wrote in the court document.
No prosecution
Liburdi’s preliminary injunction keeps state Attorney General Kris Mayes from prosecuting Kalshi on 20 misdemeanor charges permanently. Mayes can appeal the ruling, but no action has been taken at this time.
Mayes charged Kalshi in March with offering contracts on Arizona elections, which the AG argued violates state law. Arizona was also going after Kalshi for offering sports event contracts, which she says is against the state’s gambling laws.
“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,” Liburdi wrote. “That comprehensive framework is so pervasive that it forecloses parallel state regulation of designated contract market trading.”
Liburdi leaned on the congressional record that the CFTC has sole regulatory authority over prediction companies, and that it would be impossible for a trading exchange like Kalshi that’s operating in all 50 states to comply with each jurisdiction’s laws.
“The result would be the inconsistent regulatory patchwork that Congress intended to avoid,” Liburdi wrote. “Because Arizona’s gambling laws stand as an obstacle to federal regulation, those laws are preempted.”
CFTC support
CFTC Chair Michael Selig applauded the judge’s decision, adding that his agency has “full jurisdiction over prediction markets.”
I applaud today’s action by Arizona’s District Judge, which reaffirms what we all know: the @CFTC has full jurisdiction over prediction markets. We’ll keep pursuing action against any state that infringes on our statutory authority.
— Mike Selig (@ChairmanSelig) May 5, 2026
The CFTC filed a motion in April asking for a preliminary injunction and restraining order to keep Arizona from prosecuting Kalshi.
In other prediction market news, more than a dozen states are currently battling trading exchanges like Kalshi, Polymarket, and Coinbase. Prediction market platforms that offer sports contracts in states with legal sports betting have come under the most fire.
Nevada recently won a ruling to keep Kalshi from offering event contracts in the Silver State. Ultimately, this fight could end up in the Supreme Court over the next couple of years.
