Kalshi received a favorable ruling in Arizona after a district court judge reversed a decision to deny the prediction market an injunction against the state’s attorney general.
According to documents filed in the U.S. District Court for the District of Arizona, Kalshi has been granted a preliminary injunction in its legal dispute against Arizona Attorney General Kristin Mayes and the Arizona Department of Gaming (ADG).
“Here, the court concludes that federal law preempts state gambling laws insofar as they seek to regulate derivatives exchanged on markets regulated by the CFTC,” reads the order.
What changed for Kalshi in Arizona?
The order comes after Judge Michael Liburdi initially denied Kalshi’s original motion in April for a temporary restraining order (TRO) and a preliminary injunction against Arizona after the prediction market filed a complaint for a permanent injunction a month prior.
Liburdi attributed his decision to initially deny Kalshi’s motion for an injunction to the Anti-Injunction Act, a federal statute that prevents a U.S. court from granting injunctions to stay proceedings in a state court, except where expressly authorized by an act of Congress. The judge believed Kalshi’s arguments did not fall under the act’s exception provision.
“The court finds that the AIA applies and the preliminary injunction Kalshi requests does not fall within any exception to the application of the AIA,” said Liburdi in his initial decision last month.
“The court is barred by statute from issuing the injunction, so it must deny Kalshi’s requests for preliminary relief.”
Judge believes Kalshi ‘likely to succeed on the merits’
Liburdi’s decision to reverse his previous ruling and grant Kalshi an injunction allows the prediction market to continue operating in Arizona as legal proceedings continue.
Liburdi provides a reason behind his decision to grant Kalshi’s injunction after an initial denial. The judge believes Kalshi is “likely to succeed on the merits,” a requirement that a plaintiff must establish if they are seeking a preliminary injunction. A plaintiff must also show that they are “likely to suffer irreparable harm in the absence of preliminary relief.”
According to Liburdi, Kalshi’s argument that the Commodity Exchange Act (CEA) preempts Arizona’s enforcement of gaming laws against event contracts is permissible, as the CEA grants the Commodity Futures Trading Commission (CFTC) “exclusive jurisdiction” over swaps.
Liburdi believes Kalshi’s argument that its offerings are swaps is likely to succeed.
“That theory has two components. First, event contracts must qualify as swaps. Second, the CEA’s granting of exclusive jurisdiction to the CFTC over swaps preempts state enforcement against event contracts. The court concludes that federal plaintiffs are likely to succeed on both components of their theory,” wrote Liburdi in the order.
The judge also considers Kalshi’s prediction market dispute to be of public interest, a requirement for the injunction.
How did Kalshi and Arizona get to this point?
Kalshi and Arizona are in the midst of a legal dispute after ADG Director Jackie Johnson sent a cease and desist order in 2025 to Kalshi and Crypto.com for offering sports event contracts. In the C&Ds, Johnson accused the companies of facilitating illegal gambling.
The ADG and Johnson also warned Arizona gaming licensees that their licensing approvals could be in jeopardy if they facilitate sports event contracts within and outside Arizona.
Nearly a year after receiving a C&D order in Arizona, Kalshi filed a lawsuit against Mayes and the ADG in federal court, claiming that enforcement action exposes it to “irreparable harm.”
Mayes and the ADG responded to the suit by levying 20 misdemeanor criminal charges against Kalshi in state court. The charges marked the first time Kalshi faced criminal charges for its alleged illicit delivery of sports event contracts in the U.S.
The CFTC also got involved in the legal spat between Kalshi and Arizona by filing a motion in Arizona requesting the same temporary relief measures that Kalshi sought in the state.
The CFTC’s motion came after the agency, along with the U.S. Department of Justice, teamed up to file suits in three separate federal courts against Arizona, Connecticut and Illinois. The lawsuits in Connecticut and Illinois also concern sports event contracts.
Last month, the CFTC was granted the TRO it sought against Mayes and the ADG.
