Judge bars Arizona from regulating prediction market operators and pauses prosecution of Kalshi

PHOENIX (AP) — A federal judge on Friday temporarily barred Arizona from enforcing its gambling laws against predictive market operators in a lawsuit filed by the Trump administration after state prosecutors filed criminal charges that alleged Kalshi is running an illegal gambling operation there.

The ruling by U.S. District Judge Michael Liburdi also halts Arizona’s criminal case against Kalshi, which was scheduled for an arraignment hearing Monday. After the ruling, a prosecutor said the hearing won’t be held on Monday.

Liburdi said he would explain his reason for the ruling in an order, which was expected to be released Friday evening.

The federal Commodity Futures Trading Commission had sued Arizona in response to cease-and-desist letters sent to Kalshi from state gambling regulators and the criminal charges filed against the prediction market operator. The commission argued Arizona is intruding on its exclusive federal power to regulate national swaps markets.

Liburdi had previously denied Kalshi’s attempt to bar prosecutors from moving forward with the case and declined a request from the company for a ruling saying federal law trumps Arizona’s gambling laws. Liburdi said it was too early in the case for him to rule on that issue.

State prosecutors have charged Kalshi with 20 misdemeanor counts of wagering for allegedly accepting bets on political outcomes, college sports and individual player performance.

Arizona, the first state to file criminal charges against Kalshi, prohibits operating an unlicensed wagering business and betting on elections. The criminal charges mark a new front in a high-stakes legal battle over whether prediction markets should be subject to the same rules as gambling companies.

Kalshi maintains it’s a financial marketplace rather than a gambling operation and should only have to answer to the federal Commodities Futures Trading Commission, not the state of Arizona.