A Trump-appointed judge in Arizona found that the state likely overstepped its authority by targeting election bets on the popular Kalshi prediction market.
PHOENIX (CN) – A federal judge ordered Arizona to stop prosecuting Kalshi on Wednesday, joining other courts in allowing the prediction market website to continue taking bets on state and federal elections.
Although he initially denied Kalshi’s preliminary request for a restraining order, U.S. District Judge Michael T. Liburdi reversed course and agreed with market predictions that the state likely exceeded its authority in criminal prosecution federally regulated commodity exchanges.
“Here, the court concludes that federal law preempts state gambling laws insofar as they seek to regulate derivatives traded on markets regulated by the Commodity Futures Exchange Commission,” nominee Donald Trump wrote in one. command granting Kalshi’s request for interim relief.
Tuesday’s order replaced a temporary retraining order issued in Kalshi’s favor in April.
Betting on federal elections has become legal only recently after Kalshi First federal court win in 2024. Since then, federal jurisdictions in New Jersey and Tennessee have issued similar ordinances preventing prosecution, and congressional efforts to ban electoral betting have failed.
Third Circuit affirmed Kalshi’s immunity from state regulation on April 6, and the Ninth Circuit heard arguments April 16 on futures forecast markets in Nevada. If the Ninth Circuit rules against Kalshi, a split in the circuit could invite the US Supreme Court to intervene.
A 1974 amendment to the Commodity Exchange Act of 1936 gives the Commodity Futures Trading Commission “exclusive jurisdiction” over transactions involving swaps or put contracts traded on certain contract markets.
Conversely, the Arizona Gaming Act authorizes “event betting” within the state, but only when conducted by licensed operators subject to the statute’s requirements. Kalshi is not registered with the Arizona Corporation Commission. Arizona law also completely prohibits betting on elections.
In a 17-page order, Liburdi agreed with the majority of federal judges that federal law takes precedence.
“Congress’s clear understanding of exclusive jurisdiction trust necessarily denies jurisdiction to any entity other than the CFTC,” Liburdi said.
Although Kalshi is not properly registered in Arizona, federal law requires all designated futures markets to self-certify compliance with the requirements of the Commodity Exchange Act.
“These provisions regulate every aspect of markets defined by contracts, including which contracts can be listed and how trading can be conducted, leaving no room for state regulation,” Liburdi concluded. “This overarching framework is so pervasive that it precludes parallel state regulation of market trading of defined contracts.”
Arizona argued that federal law will not preempt state law “absent clear and unequivocal intent of Congress.”
“But when a state seeks to regulate conduct that has been subject to longstanding federal scrutiny, the presumption against preemption does not apply,” Liburdi countered.
Liburdi said Arizona is also barred from prosecuting Kalshi because its laws stand as direct obstructions to the full intent of an act of Congress.
“State enforcement of its gambling laws would also frustrate Congress’s objectives in creating a unified regulatory regime overseeing designated contract markets and ensuring that designated contract markets function as national markets,” he wrote. “If states were able to prosecute certain contract market operators for offering event contracts, the operators would face the possibility of fifty different regulators, each able to limit which contracts could 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 betting, a Class 2 misdemeanor, for taking bets on the 2028 presidential race, the 2026 Arizona gubernatorial race, the 2026 Arizona Republican presidential race and the 2026 Arizona secretary of state race. She faces an additional 16 Class 1 misdemeanor counts of betting on events like Arizona college sports, professional sports and whether the SAVE America Act — a collection of bills aimed at cracking down on voter fraud — will become federal law.
That indictment has now been frozen by federal order.
When she first filed the suit, Attorney General Kris Mayes said she would not be “bullied” by Kalshi’s federal lawsuit, trying to put herself above state law. In an email to Courthouse News, Mayes said her office continues to evaluate its legal options following the order.
Kalshi did not respond to a request for comment.
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