Federal court blocks Arizona gambling law on prediction markets
Judge Michael Liburdi has halted Arizona’s attempt to prosecute prediction markets.
US.- US District Judge Michael Liburdi has barred Arizona from applying its gambling statutes to prediction markets. He granted a preliminary injunction on May 5, siding with the Commodity Futures Trading Commission (CFTC) and the Department of Justice (DOJ), declaring that wagers on future events qualify as federally regulated “swaps.”
The case began when the Arizona Department of Gaming ordered CFTC‑registered Kalshi to halt operations in the state, threatening criminal prosecution. Kalshi responded in March with a lawsuit arguing that the Commodity Exchange Act (CEA) grants the CFTC exclusive jurisdiction over contracts traded on designated contract markets (DCMs). Arizona escalated matters by filing 20 criminal counts against the platform – the first such prosecution in the history of prediction markets.
On April 2, the CFTC and DOJ launched their own suit against Arizona, arguing that state gambling laws cannot be enforced against event contracts listed on federally regulated DCMs. The court initially issued a temporary restraining order, which was upgraded to a full preliminary injunction on May 5.
The court’s ruling
Liburdi described the dispute as a “clash between two competing authorities” and ruled that event contracts, including wagers on elections, sports outcomes or cultural events, fall within the CEA’s definition of “swaps”, which he said preempts Arizona’s gambling laws.
Arizona had argued that “events” should be limited to the contests themselves, not their outcomes, but the court rejected this reading, noting that the statutory language is broad enough to encompass both.
Liburdi said: “If states could prosecute DCM operators for offering event contracts, the operators would face the prospect of 50 different regulators, each capable of restricting which contracts may be listed on each exchange. The result would be the inconsistent regulatory patchwork that Congress intended to avoid.”
The ruling means citizens can continue to place bets on platforms like Kalshi and Polymarket, but Arizona Attorney General Kris Mayes has signalled a possible appeal. Meanwhile, the CFTC has filed suits against multiple states to affirm its exclusive authority.
