- ▸ A federal judge permanently blocked Arizona’s criminal case against Kalshi, ruling that the CFTC’s exclusive jurisdiction over regulated derivatives exchanges preempts state gambling law.
- ▸ The ruling is the first permanent injunction of the ongoing legal battles, giving the CFTC stronger footing as it fights similar battles in New York, Ohio, and elsewhere.
- ▸ Arizona is expected to appeal to the Ninth Circuit; the question of whether states can regulate prediction markets won’t be settled until it works through the appellate courts.
An Arizona federal judge has permanently blocked the state from pursuing criminal charges against Kalshi, handing the CFTC a major win in its escalating battle to assert exclusive federal authority over the industry. U.S. District Judge Michael Liburdi issued a permanent injunction on May 5 barring Arizona from moving forward with the criminal case it filed against Kalshi in March. The order stated: “The Court concludes that federal law preempts state gambling laws insofar as they seek to regulate derivatives exchanged on markets regulated by the CFTC.”
Arizona Attorney General Kris Mayes had hit the prediction market exchange with a 20-count criminal indictment in Maricopa County, accusing it of running an illegal gambling business and accepting bets on Arizona elections. The Commodity Futures Trading Commission stepped in to defend Kalshi, arguing that federal law gives it exclusive jurisdiction over regulated derivatives exchanges and that Arizona’s charges were an unconstitutional intrusion.
Judge Liburdi agreed. His ruling today makes permanent what started as a temporary restraining order granted in April. Arizona’s case is now dead in the district court. CFTC Chair Mike Selig celebrated the ruling in a post on X, saying it reaffirms that “the CFTC has full jurisdiction over prediction markets,” and warned the agency would keep pursuing action state challengers.
I applaud today’s action by Arizona’s District Judge, which reaffirms what we all know: the @CFTC has full jurisdiction over prediction markets. We’ll keep pursuing action against any state that infringes on our statutory authority.
— Mike Selig (@ChairmanSelig) May 5, 2026
While the ruling represents a key preemption win for the CFTC and Kalshi, the legal fight is far from over.
How we got here
The Arizona fight has been building for nearly a year. Arizona Gaming Director Jackie Johnson sent Kalshi a cease-and-desist in May 2025 after the platform began offering sports event contracts to state residents, alleging unlicensed betting. That September, Johnson warned existing Arizona gaming licensees that even allowing prediction market activity out-of-state could jeopardize their Arizona wagering licenses. In December, Arizona pulled Underdog Fantasy‘s DFS license for offering prediction markets in partnership with Crypto.com, proving its threats were not just rhetoric.
Rather than exit the state or seek a licensing accommodation, Kalshi went to federal court. On March 12, five days before Mayes filed charges, the company filed a preemptive lawsuit against Arizona officials seeking a permanent injunction, arguing any state enforcement would violate the Commodity Exchange Act. Mayes responded by filing the 20-count criminal indictment anyway, marking the first criminal charges any state had ever brought against a prediction market platform.
The CFTC then stepped in and won a temporary restraining order in April, pausing the case while the broader preemption question was litigated. Today’s permanent injunction is the final word at the district level.
What the ruling actually says
The core of today’s decision focuses on preemption and argues that federal law, specifically the Commodity Exchange Act, gives the CFTC exclusive authority over designated contract markets like Kalshi. States cannot layer their own gambling regulations on top of that. Arizona’s position, that it gets to decide whether prediction market contracts are “bets” under state law, doesn’t hold up when the underlying instruments are federally regulated derivatives.
The ruling does not address the many other statutory questions currently under court review in state cases against prediction markets. This ruling simply affirms that Arizona specifically cannot criminalize a platform that is operating under a federal license.
The election wagering piece matters here too. Arizona law bans wagering on state elections, and four of Mayes’s criminal counts were tied specifically to Kalshi offering contracts on 2026 and 2028 races. The permanent injunction wipes all of that out at the district court level, though Arizona is almost certainly going to appeal.
Arizona is just one front of many
Arizona is just one front in what has become a multi-state war over who gets to regulate prediction markets and what market types are fair game. The CFTC has now sued or intervened in cases in Arizona, Connecticut, Illinois, and most recently New York, where it’s asserting the same federal preemption theory against the state’s own crackdown.
On the state side, New York AG Letitia James has filed lawsuits against Coinbase and Gemini over their prediction market products, seeking over $3 billion in combined damages. Wisconsin has sued Kalshi, Polymarket, and Crypto.com. Ohio and Nevada have their own enforcement actions in progress. The CFTC is fighting on all of those fronts simultaneously.
What’s different about today’s Arizona ruling is that it’s the first permanent injunction of this cycle. Rather than a pause or a TRO, it’s a final district-level decision. That gives the CFTC much stronger footing in legal battles going forward.
What happens next, including likely appeal
Arizona will almost certainly appeal to the Ninth Circuit. That was always the expected path, and the temporary restraining order decision in April was framed publicly as setting up that very appeal. Now Arizona has a permanent injunction to challenge, which raises the appellate stakes considerably.
The Ninth Circuit covering Arizona would be one of at least five federal circuits where prediction market preemption cases are likely to play out. The Second Circuit (New York), Sixth Circuit (Ohio), and others are all potentially in play. If circuits start splitting on whether the CFTC’s preemption theory holds, this eventually goes to the Supreme Court.
For Kalshi and the prediction market industry more broadly, today is a meaningful win. But the legal fight is far from settled. Given how aggressively attorneys general like Mayes and New York’s James have pursued enforcement, a quick resolution is highly unlikely.
What to watch:
- Arizona’s expected Ninth Circuit appeal and its timing
- The CFTC’s New York case in the Southern District
- Whether the Sixth Circuit’s Ohio ruling creates favorable or conflicting precedent
