Kalshi Sues Montana Following Arizona Judge’s Decision to Block Criminal Charges

(AsiaGameHub) –   Legal conflicts between states and prediction markets show no signs of slowing down. Montana is the newest state to be sued by Kalshi, following an Arizona judge’s decision to block the state from pursuing criminal charges against the company.

“Kalshi is a federally designated derivatives exchange, subject to the CFTC’s exclusive jurisdiction,” the company’s latest lawsuit states for the umpteenth time.

Montana was among the first states to send Kalshi a cease-and-desist letter in March last year. After meeting with company representatives, Montana’s Gambling Control Division (GCD) agreed to hold off on further action while its legal case in Nevada was ongoing.

Nevada managed to temporarily restrict Kalshi’s markets last month. Possibly emboldened by this win, the GCD sent Kalshi another cease-and-desist letter last week.

Second C&D Letter Triggers Lawsuit

In response to the second C&D letter, Kalshi quickly filed a lawsuit against the gambling regulator.

“The April 2026 C&D mischaracterized the clear terms of the parties’ prior agreement, and said that the GCD had ‘conducted an investigation into [Kalshi’s] activities in’ Montana and concluded that they ‘constitute illegal gambling within the meaning of Montana law’,” Kalshi’s lawsuit states.

This was also Kalshi’s response when Connecticut and Tennessee became the latest states to send such demands in December and January, respectively.

“Kalshi faces an immediate threat that Defendants will attempt to enforce Montana’s preempted state laws against it,” the filing claims.

In total, 10 states have sent cease-and-desist orders. These orders haven’t succeeded in halting the platform’s operations; instead, they’ve led to legal battles. The lawsuit against Montana means Kalshi now has active court cases with state gambling regulators in all those jurisdictions.

Kalshi Strengthened by CFTC’s Backing

In its lawsuit, Kalshi noted that an Arizona judge supported the company’s position that its markets are legal under federal law and preempt state gambling regulations.

Arizona took the unprecedented step of filing criminal charges against Kalshi, but Judge Michael Liburdi ordered the state not to take any enforcement actions for the time being.

Liburdi initially refused to grant Kalshi a temporary restraining order on April 8. However, he was persuaded by the Commodity Futures Trading Commission’s (CFTC) arguments that it holds exclusive jurisdiction over Kalshi’s operations and granted the TRO on April 10.

“The Court finds that the CFTC has made a clear showing that it is likely to succeed on the merits of its claim that Arizona’s gambling laws are preempted by the Commodity Exchange Act (CEA),” the ruling stated.

The CFTC has filed lawsuits in Arizona, Connecticut, and Illinois, claiming the states are overstepping their boundaries in pursuing Kalshi and other operators.

Legal Expert: Key Argument Could Undermine Kalshi

Liburdi’s conflicting rulings over a few days highlight the complexity of determining whether sports prediction markets should be subject to state or federal law.

Daniel Wallach, a leading voice on the legal status of prediction markets, claims Arizona can use Rule 40.11(a)(1) in the CEA, which expressly prohibits contracts related to gaming.

“A key argument that Arizona should raise is that the CFTC’s failure to enforce Rule 40.11(a)(1) is contrary to the public interest–a key factor on a motion for preliminary injunction–and therefore requires the denial of the CFTC’s motion,” Wallach said on LinkedIn.

The CFTC did not mention the rule in its TRO motion, a point Wallach says state regulators should seize on.

“Risky business for the CFTC to claim the right to enforce federal law vs. states in federal court when it won’t even enforce its own regulations expressly banning ‘gaming’ contracts and then waited nearly one year after Arizona’s cease-and-desist letter to Kalshi before filing suit,” he added.

But as one commenter on Wallach’s post noted, “Unfortunately, it’s not about the law right now. It’s all about politics”.