Judge Blocks Arizona From Enforcing Laws Against Kalshi

A federal judge in Arizona has temporarily barred state officials from enforcing gambling laws against Kalshi, granting a request from the Commodity Futures Trading Commission and the federal government. The order, issued Friday by U.S. District Judge Michael Liburdi, freezes state civil and criminal actions tied to Kalshi contracts listed on markets regulated by the CFTC until April 24.

Liburdi said the CFTC is likely to succeed in its argument that Kalshi’s event contracts qualify as ‘swaps’ under the Commodity Exchange Act. If the court later issues a preliminary injunction adopting that view, federal law would preempt state enforcement against contracts listed and traded on exchanges subject to CFTC oversight.

Arizona officials had sought to apply state gambling statutes to Kalshi’s products last month. The CFTC asked the court to halt those efforts while it pursues claims that the contracts require registration, oversight and compliance with federal market rules.

Kalshi runs markets where users buy contracts that pay out based on the outcome of events such as elections, weather and economic indicators. The CFTC treats those contracts as derivatives when they trade on designated contract markets. Some states view similar offerings as gambling that may require state licenses or could trigger civil or criminal penalties.

The Arizona order does not resolve the underlying legal question and leaves room for further litigation. The temporary restraining order remains in place while the court considers whether to grant a longer-term preliminary injunction, and additional hearings are expected as the legal arguments proceed.

Other states have taken actions against event-based markets. Utah last month enacted a law classifying proposition-style bets on in-game or event outcomes as gambling. A Nevada judge recently extended a ban that prevents Kalshi from offering event contracts in that state, finding the offerings closely resemble traditional sports betting.

Market participants, state regulators and federal authorities are watching the case because its outcome could decide whether event-based markets operate mainly under federal derivatives rules or under state gambling laws. The Arizona order temporarily shields Kalshi in that state but does not affect ongoing actions elsewhere.