Judge Quashes Arizona Lawsuit Against Kalshi
Mike Goodpaster Published 08/05/2026
The attempt by the Arizona government to shut down prediction market site Kalshi from operating in the state looks to be at an end. A federal judge has ruled against the state's bid to bring criminal charges against Kaslhi for illegal sports betting.
Judge Michael Liburdi's preliminary injunction against the state has permanently blocked Arizona Attorney General Kris Mayes from prosecuting Kalshi. Liburdi concluded that the federal Commodities Futures Trading Commission (CFTC) is the sole regulator over Kalshi and all other prediction markets. And a state is not legally able to enforce its laws against federally regulated prediction markets.
Arizona's lawsuit against Kalshi began in March
On March 17, Mayes originally brought forth an indictment with 20 misdemeanors against Kalshi in Maricopa County Superior Court. The allegations were that Kalshi had broken Arizona law by operating an unlicensed wagering operation in the state. Kalshi was also accused of breaking state law by allowing bets on the Arizona elections.
This would mark the first time that criminal prosecution would be attempted against a CFTC-regulated prediction market offering event contracts in the USA.
It wouldn't take long for the case to begin falling apart.
On April 17, Judge Liburdi first blocked Arizona from continuing its criminal case against Kalshi. Robert Denault, the lawyer representing Kalshi, took to social media to celebrate the ruling. "Federal law is supreme," Denault posted.
CFTC Chairman Michael S. Selig was also in a celebratory mood following the ruling.
“Arizona’s decision to weaponize state criminal law against companies that comply with federal law sets a dangerous precedent, and the court’s order sends a clear message that intimidation is not an acceptable tactic to circumvent federal law," Selig said in a statement.
Judge Liburdi doubles down in Kalshi's favor
With his latest ruling, Judge Liburdi appears to be slamming the door on any hopes that the Arizona government may have of shutting down Kalshi's prediction market operation. He is granting Kalshi a preliminary injunction. It was the CFTC that was pursuing this injunction against the Arizona government.
“Every time Congress has revisited the federal-state allocation of authority in this area, it has chosen to expand federal control,” Liburdi wrote, according to the Tucson Sentinel. “It has done so while expressing unease about the costs of state-by-state regulation.”
In his order, Liburdi reaffirmed that the only regulator with the power to make rulings over prediction market sites such as Kalshi is the CFTC. He wrote that it would be impossible for a federally regulated site to be forced to comply with 50 different sets of state law.
“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."
What will the next steps be for the Arizona Attorney-General's office?
On the surface, there seems to be little that Mayes can do to respond to Judge Liburdi's ruling. A spokesperson for Mayes stated that the Attorney General’s Office “continues to evaluate our legal options related to the case.” That state admitted that it hasn’t determined what its next steps might be.
One option could be to pursue a clash over federalism. A federalism clash is a legal or political conflict in which state governments and the federal government disagree over which level of government has authority over a specific policy area. These disputes often occur when states challenge federal mandates or when federal law conflicts with state law. It could end up forcing the Supreme Court to decide which level of government prevails.