Federal Judge Blocks Arizona From Bringing Criminal Charges Against Kalshi

Federal Judge Michael Liburdi temporarily blocked Arizona from prosecuting prediction market platform Kalshi under state gambling laws, following a request by the CFTC and DOJ filed on April 8, 2026. The federal regulators argue that Kalshi's contracts on sports, elections, and other events are financial derivatives called swaps regulated exclusively under the Commodity Exchange Act, not state-level gambling. Arizona filed criminal charges against Kalshi with arraignment scheduled for April 13, 2026, joining other states that view these contracts as traditional wagers. The legal dispute could determine whether prediction markets operate nationwide under federal oversight or remain subject to state-by-state gambling regulations, with courts split on the issue despite a recent New Jersey appeals court ruling favoring Kalshi.

Federal government's legal argument that prediction markets are financial derivatives

• ▪The federal government argues that a contract on the Super Bowl is not fundamentally different from one tied to oil prices or interest rates
• ▪The Commodity Futures Trading Commission and Department of Justice argue that contracts tied to sports, elections and other real-world events are financial derivatives known as swaps
• ▪Federal regulators argue that Kalshi's contracts fall under the Commodity Exchange Act because payouts depend on whether a future event happens and that event can have economic consequences
• ▪The Commodity Futures Trading Commission and Department of Justice filed a request to block Arizona from enforcing its gambling laws against Kalshi on late Tuesday, April 8, 2026
• ▪The Commodity Futures Trading Commission claims to have exclusive jurisdiction over prediction market contracts under the Commodity Exchange Act

Arizona's criminal enforcement action against Kalshi

• ▪Kalshi's arraignment on criminal charges in Arizona is scheduled for April 13, 2026
• ▪Judge Michael Liburdi ordered Arizona not to bring any enforcement actions under state law against Kalshi, at least temporarily

Conflicting court rulings and implications for nationwide regulation

• ▪A federal appeals court in New Jersey recently sided with Kalshi, finding that Kalshi's sports contracts are presumptively allowed under federal law unless the Commodity Futures Trading Commission intervenes
• ▪Courts in jurisdictions other than New Jersey have been more receptive to state arguments, allowing enforcement actions against prediction markets to move forward