On May 14, 2026, U.S. District Judge Michael Liburdi issued a preliminary injunction blocking Arizona from prosecuting Kalshi over its prediction-market operations. The ruling halts 20 criminal counts filed by the state, which alleged Kalshi was operating an unlicensed gambling business.

Liburdi’s opinion echoed the federal field-preemption framework: “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.”

Federal courts back CFTC jurisdiction

The Third Circuit decision on April 6 was the first appellate ruling on the question. A 2-1 panel held that the Commodity Exchange Act preempts state gambling law when applied to sports-related event contracts traded on CFTC-registered designated contract markets, the regulated venue category Kalshi operates as. New Jersey had sought to block Kalshi from listing contracts tied to NFL and NBA game outcomes within state borders, arguing the contracts constituted illegal sports gambling.

And the Arizona case followed the same pattern. State prosecutors charged Kalshi with operating an unlicensed gambling venue. Liburdi upgraded an earlier temporary restraining order to a preliminary injunction, finding event contracts are federally regulated products under exclusive CFTC jurisdiction. The CFTC has argued in parallel filings that sports event contracts qualify as swaps under the Commodity Exchange Act’s definition covering agreements dependent on “the occurrence, nonoccurrence, or the extent of the occurrence” of an event, and that “states cannot invade the CFTC’s exclusive jurisdiction over CFTC-regulated designated contract markets by re-characterizing swaps trading on DCMs as illegal gambling.”

State backlash widens through May

Federal preemption is not, however, the whole story. State courts have ruled the other way in two of the most significant cases. A Massachusetts Suffolk County Superior Court judge found in January 2026 that Kalshi’s sports contracts are subject to Massachusetts gaming laws and issued a preliminary injunction effective March 8, 2026, blocking in-state sports event-contract trading without a state licence. In Nevada, Judge Andrew P. Gordon initially granted Kalshi relief in April 2025 but reversed course in December, finding certain sports contracts “closely resemble” traditional sportsbook bets.

The state-side pressure has expanded sharply in May. On May 13, New Mexico pueblos filed a lawsuit alleging Kalshi’s prediction market violates tribal gaming sovereignty. The same day, a Kentucky class action was filed against Kalshi seeking to recover gambling losses under state law. Minnesota is considering legislation that would ban prediction markets outright. Cumulative state and tribal litigation against Kalshi now spans roughly ten jurisdictions, including New Jersey, Nevada, Massachusetts, Tennessee, Ohio, Connecticut, New York, Maryland, the Northern District of California, and Wisconsin, before counting the May filings.

Field preemption versus conflict preemption

The legal argument hinges on which preemption framework controls. Field preemption is Kalshi’s position: the CFTC’s exclusive jurisdiction over designated contract markets occupies the entire field, leaving no regulatory space for state gambling law to operate. Conflict preemption is the state position: federal and state compliance can coexist, and states retain traditional police powers over gambling that are not displaced unless the CFTC explicitly says they are. The Third Circuit chose field preemption. Liburdi chose field preemption. The Massachusetts Superior Court chose conflict preemption. The Nevada district court chose conflict preemption.

A coherent national framework therefore does not yet exist. And the split is not random. Federal courts have favoured Kalshi. State courts have favoured the gambling-law framework. The appellate path on the state losses now becomes the centre of the next round of litigation.

What to watch next

The Kentucky and New Mexico filings will face early motions to dismiss on preemption grounds, and the early answers from those benches will calibrate how durable today’s Arizona ruling is in front of judges who have not yet weighed in. CFTC Chair Michael Selig, who took the position in late 2025, has publicly supported “lawful innovation” in prediction markets, a posture that has shaped the agency’s pro-DCM filings across the docket. The Department of Justice is separately pursuing the first federal criminal insider-trading case against a prediction-market trader, the Master Sgt. Gannon Van Dyke Polymarket Maduro matter, with no trial date yet set. Two parallel pipelines. One regulatory question.