Kalshi Notches Arizona Win as Judge Grants Preliminary Injunction

• A U.S. District Court Judge granted a temporary restraining order motion from Kalshi, barring the state from taking any legal action during the course of the lawsuit
• Judge Michael T. Liburdi denied Kalshi’s initial motion for a preliminary injunction in early April
• However, Judge Liburdi reversed course, concluding federal law preempts state gambling laws as they seek to regulated event contracts

A U.S. District Court Judge reversed an original decision and decided to grant Kalshi’s motion for a preliminary injunction against Arizona.

The state will be prohibited from taking legal action during the course of the prediction market company’s lawsuit against Kristin K. Mayes, Attorney General of Arizona, and several high ranking officials with the Arizona Department of Gaming, including its director Jackie Johnson.

“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. The Court will grant Federal Plaintiffs’ Motion for Preliminary Injunction,” Judge Michael T. Liburdi wrote in his decision.

Reverses Course

Judge Liburdi’s decision comes nearly a month after he originally denied Kalshi’s motion. Liburdi denied the prediction market company’s motion for a preliminary injunction and temporary restraining order against Arizona, citing the court is barred by the Anti-Injunction Act (AIA) from issuing an injunction.

“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. The Court is barred by statute from issuing the injunction, so it must deny Kalshi’s requests for preliminary relief,” Judge Liburdi wrote in his decision.

Liburdi initially disagreed with Kalshi’s request it be given an exception to the AIA.

However, Judge Liburdi today concluded the federal plaintiffs have demonstrated they are likely to succeed on merits.

“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,” Liburdi wrote.

Mayes and the state have the right to appeal Judge Liburdi’s decision.

Kalshi Says Department Believes Offerings Are Illegal Gaming

Kalshi filed its preemptive lawsuit against Arizona on March 12.

Counsel for Kalshi pointed to a May 21, 2025, cease-and-desist letter sent to the prediction market company by the Arizona Department of Gaming as a clear sign the department would be taking legal action if they did not conclude their business in the state.

“The letter directed Kalshi to ‘cease gambling operations in Arizona and desist from engaging in those activities in the future’ and threatened Kalshi with criminal penalties if it did not comply. Defendants have additionally made numerous statements indicating they believe Kalshi is operating unlawfully under Arizona’s anti-gambling laws by offering event contracts. The agencies also threatened to revoke the license of any entity that partners with Kalshi anywhere in the United States,” counsel wrote.

According to Kalshi, the company attempted to contact the Arizona Attorney General to obtain written assurances of non-enforcement, but was met with silence from the office “even though the Arizona Attorney General had previously been willing to communicate with counsel and had previously assured Kalshi that defendants would not pursue an enforcement action without providing prior notice.”

An Arizona Department of Gaming spokesperson told Sports Betting Dime the “agency is aware of the lawsuit against the Department of Gaming, filed by Kalshi” but cannot comment further.