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

(AsiaGameHub) –   The ongoing legal conflict between state authorities and prediction markets shows no sign of ending. Montana has become the most recent state to be sued by Kalshi, following a ruling by a judge in Arizona that prevented 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 issue Kalshi a cease-and-desist letter in March of last year. Following discussions with company representatives, Montana’s Gambling Control Division (GCD) agreed to refrain from further action while its legal case proceeded in Nevada.

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

Second C&D Letter Prompts Lawsuit

In reaction to the second cease-and-desist letter, Kalshi filed a lawsuit promptly against the gambling regulator.

“The April 2026 C&D letter misrepresented the clear terms of the parties’ prior agreement, asserting 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’,” states Kalshi’s lawsuit.

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

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

Altogether, 10 states have issued cease-and-desist orders. These orders have failed to halt the platform’s operations but have instead sparked legal disputes. The lawsuit filed against Montana means there are now active court cases between Kalshi and state gambling regulators in all those jurisdictions.

Kalshi Strengthened With CFTC in Its Corner

In its lawsuit, Kalshi pointed out that a judge in Arizona supported the company’s position that its markets are lawful 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 to halt any enforcement actions for the time being.

Liburdi initially declined to grant Kalshi a temporary restraining order on April 8. However, he was convinced by the Commodity Futures Trading Commission’s (CFTC) arguments that it holds exclusive jurisdiction over Kalshi’s operations. He 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 filed lawsuits in Arizona, Connecticut, and Illinois, alleging that the states are overstepping their boundaries in pursuing Kalshi and other operators.

Legal Expert: Key Argument Could Defeat Kalshi

The contrasting rulings from Liburdi within a few days highlight the complexity of determining whether sports prediction markets should fall under state or federal jurisdiction.

Daniel Wallach, a leading authority on the legal status of prediction markets, argues that Arizona can utilize Rule 40.11(a)(1) in the CEA, which explicitly prohibits contracts related to gaming.

“A crucial argument 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 stated on LinkedIn.

The CFTC did not mention this rule in its motion for a TRO, which Wallach says state regulators should seize upon.

“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.

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