Days after denying Kalshi temporary relief against Arizona state officials, a federal judge granted a request from the Commodity Futures Trading Commission (CFTC) for a temporary restraining order (TRO) against the state’s Attorney General and gaming regulator.
The CFTC wrote Friday in a public release that, at the request of the federal agency, the U.S. District Court for the District of Arizona blocked Arizona from pursuing criminal charges against CFTC-regulated designated contract markets like Kalshi for the time being.
Kalshi sued AG Kris Mayes and Arizona Department of Gaming (ADG) leaders in federal court in March, claiming that Arizona’s 2025 cease-and-desist letter and public comments on prediction markets equated to “a substantial risk” of attempted enforcement action.
Arizona’s officials responded by filing the first criminal charges against Kalshi in state court on March 17, pursuing 20 misdemeanor charges in light of the company offering event-based contracts that the state says are tantamount to illegal wagering.
CFTC obtained what Kalshi could not be given
Judge Michael Liburdi stated in a court order last week that he could not issue a preliminary injunction or TRO to Kalshi because he was prevented from doing so by the Anti-Injunction Act (AIA), which states that a U.S. court may not grant an injunction to stay proceedings in a state court, except in certain specific circumstances.
“The exception to the AIA applies only ‘to injunctions issued at the request of the United States,’” noted Liburdi. “… The federal government has not yet requested the preliminary relief that this Court is assessing. So the Court will not apply the exception here.”
On April 8, the same day that Liburdi denied Kalshi the TRO and preliminary injunction it sought, the CFTC filed its own motion asking the court to grant the temporary relief measures to the federal agency to halt “Arizona’s efforts to apply state criminal and gambling laws against CFTC-regulated prediction markets”.
Liburdi granted the CFTC’s request, which did fall under the AIA exceptions. He determined that the CFTC sufficiently demonstrated that event contracts fall within the Commodity Exchange Act (CEA) definition of “swaps” and showed a reasonable chance of success in showing that the act preempts Arizona law.
Selig says Arizona set ‘dangerous precedent’
“The CFTC appreciates the court’s careful consideration of these important legal questions and the court’s decision to preserve the status quo,” said CFTC Chairman Michael Selig. “Arizona’s decision to weaponize state criminal law against companies that comply with federal law sets a dangerous precedent, and the court’s order today sends a clear message that intimidation is not an acceptable tactic to circumvent federal law.”
“The attorney general’s office disagrees with the court’s ruling and we will evaluate our next steps,” said a spokesperson for AG Mayes’ office, as quoted by the Associated Press.
Liburdi’s ruling meant that an arraignment hearing scheduled for Monday was cancelled, reported AP.
CFTC inserts itself into court conversations
The updates in Arizona came after President Donald Trump’s administration sued that state, as well as Connecticut and Illinois. The CFTC and the Department of Justice (DOJ) filed complaints seeking declaratory judgments that uphold what Selig and Kalshi say is the agency’s exclusive federal authority to regulate event contracts, including those that are ostensibly similar to sports wagering.
Arizona has become a particularly complex battleground. The CFTC’s own suit was the third court action relating to Kalshi’s presence in the state, after Kalshi’s federal court lawsuit and Mayes’ state court criminal complaint.
The CFTC’s active involvement in court cases over prediction markets is the latest chapter in the litigation story. Selig said at his Senate confirmation hearing last fall that he would defer to the courts on event contract issues. Now, he is leading his agency into battle on the side of the companies that offer those products.
