TLDR A federal judge issued a preliminary injunction stopping Arizona from applying its gambling laws to prediction markets The ruling came after Arizona filed criminal charges against Kalshi, a CFTC-regulated prediction market platform The court found that federal law preempts state authority over event contracts traded on registered markets The decision is part of a broader legal fight, with the CFTC suing multiple states to defend its jurisdiction Courts in other states have split on the issue, with appeals expected to continue
The legal battle between state gambling regulators and the federal government over prediction markets just hit another turning point. A federal judge in Arizona has blocked the state from enforcing its gambling laws against platforms regulated by the Commodity Futures Trading Commission.
On May 5, 2026, the District Court for Arizona issued a preliminary injunction. The order bars Arizona from pursuing criminal or civil actions against event contracts traded on CFTC-regulated designated contract markets.
The case began when Arizona’s Department of Gaming sent a cease-and-desist letter to KalshiEX LLC. The state warned the prediction market platform to stop operating without a state license.
Shortly after, Arizona’s attorney general filed criminal charges against Kalshi. It was the first criminal prosecution of its kind against a prediction market platform in the United States.
Kalshi fought back by filing a lawsuit. The company argued that the Commodity Exchange Act gives the CFTC sole jurisdiction over contracts traded on registered markets.
The CFTC and the Department of Justice then filed their own case against Arizona. They claimed state enforcement was preempted by federal law.
Court Finds Federal Law Overrides State Gambling Rules
The judge sided with the federal regulators. The court said Congress gave the CFTC exclusive authority over swaps and event contracts.
The ruling rejected Arizona’s argument that