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A federal court This week blocked Arizona's efforts to prevent prediction markets like Kalshi and Polymarket from operating in the state.
In an order issued on May 5, 2026, the US District Court for the District of Arizona granted a preliminary injunction — a significant win for the Commodity Futures Trading Commission (CFTC or Commission) and the Department of Justice (DOJ) in their campaign to assert exclusive federal authority over event contracts traded on CFTC-registered designated contract markets (DCMs).
U.S. District Judge Michael Liburdi’s ruling means a Monday arraignment hearing for Kalshi has been called off. State prosecutors allege Kalshi is running an illegal gambling operation. The order was issued in a lawsuit filed by the Trump administration.
The judge’s order said the federal Commodity Futures Trading Commission had sufficiently shown that “event contracts” fall within the Commodity Exchange Act’s definition of “swaps,” and that it had demonstrated a reasonable chance of success in showing that the act preempts Arizona law.
“The Act grants the CFTC ‘exclusive jurisdiction’ over the regulation of ‘swaps,’” traded or executed on a Designated Contract Markets, the order said.
The 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.
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.
Robert DeNault, head of enforcement at Kalshi, said in a posting on X that the ruling is “a step in the right direction.”
“Arizona’s decision to weaponize state criminal law against companies that comply with federal law sets a dangerous precedent,” Michael Selig, chairman of the Commodity Futures Trading Commission, said in a statement. “And the court’s order today sends a clear message that intimidation is not an acceptable tactic to circumvent federal law.”
Kalshi has said its product is different from gambling operations because Kalshi’s customers engage in “swaps” between one another instead of betting against the “house.”
Lawyers for the state contend Kalshi has marketed itself as a platform for sports and election betting and that Arizona should be able to enforce its gambling laws to hold Kalshi accountable for flouting state law.
Federal and state judges in Nevada and Massachusetts, respectively, issued early rulings in favor of states looking to ban Kalshi.
The federal government recently filed suits against both Connecticut and Illinois. A ruling in either of those cases has yet to be determined.
President Donald Trump’s eldest son is an adviser for both Kalshi and Polymarket and an investor in the latter.
Arizona is unique in the world of U.S. regulated sports betting as it is the first and only state to license one of the original offshore sportsbooks, BetCRIS. The business, founded by Ron "Cigar" Sacco, began operating in the Dominican Republic in 1986 and only stopped accepting customers from the U.S. just over a decade ago. It opted instead to focus on the Latin American market. That company also runs retail betting shops in El Salvador, Panama, Honduras, Nicaragua, Guatemala, Peru, Ecuador and, for a time, Venezuela.
Arizona's last Governor, Doug Ducey, a Republican who served from 2015 to January 2023, is related to the Scott/Scotti family in Ohio on his mother's side. Bill Scott, Ducey's maternal uncle, ran one of the largest offshore sportsbooks during the 1990's through the 2000's out of Antigua, World Wide Tele Sports. Ducey himself has no ties to bookmaking.
- GIlbert Horowitz, Gambling911.com
