Judge shields Kalshi election wagering in Arizona
A Trump-appointed judge in Arizona found the state likely exceeded its authority by targeting election betting on the popular prediction market Kalshi.
PHOENIX (CN) — A federal judge ordered Arizona to pause prosecution against Kalshi on Tuesday, aligning with other courts in allowing the prediction market website to continue to host bets on state and federal elections.
Though he initially denied Kalshi's preemptive request for a restraining order, U.S. District Judge Michael T. Liburdi reversed course and agreed with the prediction market that the state likely exceeded its authority in prosecuting federally regulated commodities exchanges.
"Here, the court concludes that federal law preempts state gambling laws insofar as they seek to regulate derivatives exchanged on markets regulated by the Commodity Futures Exchange Commission," the Donald Trump appointee wrote in an order granting Kalshi's motion for preliminary injunction.
Tuesday's injunction replaced a temporary restraining order issued in Kalshi's favor in April.
Betting on federal elections has only recently become legal following Kalshi's first federal court win in 2024. Since then, federal jurisdictions in New Jersey and Tennessee have issued similar injunctions preventing prosecution, and congressional efforts to prohibit election wagering have failed.
The Third Circuit affirmed Kalshi's immunity from state regulation on April 6, and the Ninth Circuit heard arguments April 16 over the future of prediction markets in Nevada. If the Ninth Circuit rules against Kalshi, a circuit split could invite the U.S. Supreme Court to intervene.
A 1974 amendment to the 1936 Commodities Exchange Act gives the Commodity Futures Trading Commission "exclusive jurisdiction" over transactions involving swaps or contracts of sale traded on designated contract markets.
Conversely, Arizona's Gaming Act authorizes "event wagering" within the state, but only when conducted by licensed operators who submit to the statute's requirements. Kalshi is not registered with the Arizona Corporation Commission. Arizona law also outright prohibits betting on elections.
In a 17-page order, Liburdi agreed with the majority of federal judges that federal law takes precedent.
"The plain meaning of Congress' entrustment of exclusive jurisdiction necessarily denies jurisdiction to any entity besides the CFTC," Liburdi said.
Though Kalshi is not properly registered in Arizona, federal law requires all designated contract markets to self-certify compliance with the requirements of the Commodities Exchange Act.
"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 concluded. "That comprehensive framework is so pervasive that it forecloses parallel state regulation of designated contract market trading."
Arizona argued that federal law shall not preempt state law "absent a clear and manifest purpose of Congress."
"But where a state seeks to regulate conduct that has been subject to longstanding federal control, the presumption against preemption does not apply," Liburdi contested.
Liburdi said Arizona is also preempted from prosecuting Kalshi because its laws stand as direct obstacles to the full purpose of a congressional act.
"The state's enforcement of its gambling laws would also frustrate Congress' objectives in creating a unified regulatory regime that oversees designated contract markets and ensuring that designated contract markets operate as national markets," he wrote. "If states could prosecute designated contract market operators for offering event contracts, the operators would face the prospect of 50 different regulators, each capable of restricting which contracts may be listed on each exchange. The result would be the inconsistent regulatory patchwork that Congress intended to avoid."
In Arizona, Kalshi faces four counts of election wagering, a Class 2 misdemeanor, for taking bets on the 2028 presidential race, the 2026 Arizona gubernatorial race, the 2026 Arizona Republican gubernatorial primary and the 2026 Arizona secretary of state race. It faces 16 additional Class 1 misdemeanors for wagering on events like Arizona college sports, professional sports and whether the SAVE America Act — a collection of bills intended to crack down on voter fraud — will become federal law.
That indictment is now frozen by the federal injunction.
When she first filed the indictment, Attorney General Kris Mayes said she wouldn't be "bullied" by Kalshi's federal suit attempting to place itself above state law. In an email to Courthouse News, Mayes said her office continues to evaluate its legal options following the injunction.
Kalshi has not replied to a request for comment.