US judge blocks Arizona case against Kalshi

A U.S. federal judge has blocked Arizona from pursuing criminal charges against prediction market platform Kalshi, marking a key moment in the growing legal battle over the regulation of event-based trading.

The ruling came after a request from the Commodity Futures Trading Commission (CFTC), which argues that federal law—not individual states—has authority over prediction markets, News.Az reports, citing Reuters.

Following a hearing before Michael Liburdi, the court issued a temporary restraining order preventing Arizona from continuing its criminal case against Kalshi.

The CFTC said the decision protects companies operating under federal oversight from what it described as state-level overreach.

CFTC Chairman Michael S. Selig warned that using criminal law against federally regulated firms could set a “dangerous precedent.”

Arizona had accused Kalshi of:

• Running an illegal gambling operation
• Allowing users to bet on election outcomes

The case, filed by Attorney General Kris Mayes, is the first criminal action by a state against the company.

However, Kalshi has denied wrongdoing, arguing that its platform is fundamentally different from traditional sportsbooks or casinos.

The case is part of a broader conflict between state authorities and prediction market platforms, including companies like:

• Polymarket
• Crypto.com
• Robinhood

Earlier this month, the administration of Donald Trump filed lawsuits against multiple states, including Arizona, Connecticut, and Illinois, seeking to block their efforts to regulate prediction markets under gambling laws.

At the heart of the dispute is a key legal question:

Are prediction markets financial products—or gambling?

• The CFTC says they fall under federal financial regulation
• States argue they resemble sports betting and should be locally regulated

The outcome of this legal fight could:

• Define how prediction markets operate in the U.S.
• Set limits on state vs federal regulatory power
• Impact the future of platforms offering event-based trading, including bets on elections, economics, and global events

For now, the court’s decision gives Kalshi a temporary legal victory, but the broader battle is far from over.

News.Az 

By Aysel Mammadzada