- ▸ A forthcoming TRO pauses Arizona’s criminal case, reinforcing the federal preemption argument over DCMs.
- ▸ Arizona can appeal the TRO now or wait and appeal after a district court ruling on the merits.
- ▸ The TRO’s scope and ultimate ruling, with a likely Ninth Circuit appeal, could help set the boundaries of state authority over prediction markets.
US district judge Michael Liburdi indicated on Friday that he would grant the Commodity Futures Trading Commission’s request for a temporary restraining order (TRO) preventing Arizona from pursuing criminal charges against Kalshi. Arizona Attorney General Kris Mayes had charged Kalshi with multiple violations of the state’s gambling laws.
The exact terms of the restraining order, including its potential expiration date, are still pending Liburdi’s issuance of the document. Mayes will have appeal options when the order drops, but extenuating circumstances might make it preferential for Mayes to accept the court’s decision for the time being.
Temporary Restraining Order Blocks Arizona Criminal Enforcement Proceedings on Prediction Markets: https://t.co/KDsT63kpbd
— CFTC (@CFTC) April 10, 2026
Liburdi commits to restraining Arizona’s criminal case against Kalshi
Liburdi stated after Friday’s hearing in the Commodity Futures Trading Commission’s (CFTC) lawsuit against Arizona that he “will enter a temporary restraining order,” according to Jack Newsham of Business Insider. Newsham further reported that representatives for the state will ask the state court to pause their criminal proceedings against Kalshi on Monday as a result.
As of the time of this writing, Liburdi had not yet issued the TRO. However, it’s the first victory for the trio of lawsuits that the CFTC initiated against Arizona, Connecticut, and Illinois in early April. In all three of those actions, the CFTC named state officials as defendants and argued that their attempts to restrict the operation of CFTC-registered prediction market exchanges infringed upon the CFTC’s sole regulatory powers over designated contract markets (DCMs).
Mayes filed the charges against Kalshi a couple of weeks prior. Arizona was the first to take the step of bringing criminal charges against a DCM exchange like Kalshi, attempting to establish that Kalshi’s contracts represented unlicensed sports wagering and violated the state’s laws against betting on election outcomes.
As long as the TRO is in effect, prosecutors in Arizona likely won’t be able to proceed in pursuing those charges. That is, of course, unless Mayes is able to successfully appeal the order.
Yet another potential appeal to the Ninth Circuit
The appellate court for the federal district of Arizona is the Ninth Circuit, which has already declined to intervene in a dispute between Kalshi and Nevada. The TRO represents another potential plea to the Ninth, though.
In March, the Ninth rejected a request from Kalshi to stay a TRO from a Nevada state court banning most forms of DCMs trading within the state’s borders. Mayes could ask the Ninth to overturn the TRO against his office pursuing criminal charges.
If Liburdi’s TRO remains in effect for the duration of the CFTC’s case against Arizona, overturning it on appeal to the Ninth Circuit could be challenging. The state would need to demonstrate that keeping the TRO in place causes irreparable harm to its interests or residents, and that allowing its criminal case to proceed in state court while the federal dispute unfolds would mitigate that harm.
If Mayes declines to ask the Ninth Circuit to overturn the TRO, it would not mean Arizona is abandoning its criminal case against Kalshi. A victory against the CFTC at the federal district court level would instead provide a strong endorsement of pursuing those charges.
That trial would be another path to an appeal to the Ninth. Combined with the dispute in Nevada plus litigation in Washington, both Washington’s state case against Kalshi and Robinhood’s federal case against Washington, it seems inevitable that the Ninth will be asked to weigh in on the matter of federalism within the scope of prediction markets again.
The content of Liburdi’s forthcoming TRO could make such a request less or more imminent.
Scope of Liburdi’s order could signal appeal chances
Arizona’s criminal charges didn’t pertain to all Kalshi DCMs. Rather, the allegations focused on contracts related to election outcomes and sporting events.
However, in its petition to the court, the CFTC argued that any attempt by Arizona to restrict DCMs represents usurpation of its “exclusive jurisdiction” over exchanges. The complaint to the federal district court from the CFTC also argues that existing federal law explicitly preempts any state statutes pertaining to DCMs.
Thus, the breadth of Liburdi’s TRO will be important. A broad order restraining Arizona from taking any enforcement action against any prediction markets whatsoever and a narrower order pausing the state’s current criminal proceedings against Kalshi are two materially different rulings.
The latter potentially leaves Arizona room to alter its approach as long as it swings clear of what Liburdi has restrained. The former is more detrimental to Arizona’s interest in establishing sovereignty over exchanges but could also become appeal fodder.
It’s possible that Arizona could argue that CFTC regulations governing DCMs are incomplete or that the CFTC’s enforcement of the rules is lacking. For that reason, Mayes could propose Arizona is simply stepping in to fill the gap according to its own laws.
Mayes and other Arizona officials are likely to consider their options after the full text of Liburdi’s order is available to scrutinize. The status quo outlined in Liburdi’s comments means that trading event contracts on DCMs like Kalshi can continue uninterrupted for users in Arizona, at least for the time being.
