KalshiEX LLC v. Johnson et al

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WO
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF ARIZONA
KalshiEX LLC,
Plaintiff,
v.
Jackie Johnson, et al.,
Defendants.
No. CV-26-01715-PHX-MTL
ORDER
This Order addresses Consolidated Plaintiffs United States and Commodity Futures
Trading Commission’s (collectively, the “CFTC”) Motion for Temporary Restraining
Order and Preliminary Injunction (Doc. 49). The CFTC seeks temporary and preliminary
relief enjoining Defendants from prosecuting actions related to event contracts listed on
CFTC-regulated Designated Contract Markets (“DCM”). (Doc. 49-1 at 2.)
I.
The Court must first determine that certain threshold issues are satisfied.
1. 	The Court finds that the CFTC has standing to sue to enjoin enforcement of
preempted state laws. “[T]he general rule [is] that the United States may sue to protect its
interests.” Wyandotte Transp. Co. v. United States, 389 U.S. 191, 201 (1967). The CFTC
may sue to enjoin the enforcement of preempted state law, as the United States has done in
prior suits. See United States v. Sup. Ct. of N.M., 839 F.3d 888, 906 n.9 (10th Cir. 2016)
(citing Armstrong v. Exceptional Child Ctr., Inc., 575 U.S. 320, 325-27 (2015)) (finding
“in favor of . . . permitting the United States to invoke preemption in order to protect its
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interest”); see also United States v. Arizona, 567 U.S. 387, 416 (2012) (affirming in part a
preliminary injunction barring enforcement of preempted state law).
2. 	The Court is not compelled to abstain under Younger v. Harris, 401 U.S. 37
(1971), since the United States is a party. See United States v. Morros, 268 F.3d 695, 699,
707-08 (9th Cir. 2001).
3. 	The Anti-Injunction Act, 28 U.S.C. § 2283, does not bar this Court from
enjoining the state court proceedings because the United States and the CFTC are the
parties seeking injunctive relief. Sec. & Exch. Comm’n v. Wencke, 577 F.2d 619, 623
(9th Cir. 1978).
4. 	Defendants’ asserted laches defense does not apply to the CFTC. See United
States v. Summerlin, 310 U.S. 414, 416 (1940) (“It is well settled that the United States is
not . . . subject to the defense of laches in enforcing its rights.”). Even if it did, the Court
finds that the CFTC’s mere delay of weeks to file its Motion is not unreasonable, and
Defendants have provided no argument that they were prejudiced.
II.
To grant a temporary restraining order, the Court must consider the factors outlined
in Winter v. Natural Resources Defense Council, Inc., 555 U.S. 7, 20 (2008). See Stuhlbarg
Int’l Sales Co., Inc. v. John D. Brush & Co., Inc., 240 F.3d 832, 839 n.7 (9th Cir. 2001)
(holding that the standard for issuing a temporary restraining order is the same as that for
a preliminary injunction).
1. 	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”). Accord KalshiEX, LLC v. Flaherty, — F.4th —, 2026
WL 924004 (3d Cir. Apr. 6, 2026).
The CFTC has sufficiently demonstrated that event contracts fall within the CEA’s
definition of “swaps,” 7 U.S.C. § 1a(47)(A)(ii). The Act defines a “swap” as “any
agreement, contract, or transaction . . . that provides for any purchase, sale, payment, or
delivery . . . that is dependent on the occurrence, nonoccurrence, or the extent of the
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occurrence of an event or contingency associated with a potential financial, economic, or
commercial consequence.” Id. Event contracts, which are based on the occurrence or
nonoccurrence of a specified future event, are associated with financial, economic, or
commercial consequences. This finding is not boundless. It is constrained by a limiting
principle that recognizes only those downstream financial consequences that are direct and
proximate to the underlying event, as reflected by the examples provided by the CFTC on
the record.
The CFTC has demonstrated a reasonable chance of success in showing that the
Act, at a minimum, field preempts Arizona law. The Act grants the CFTC “exclusive
jurisdiction” over the regulation of “swaps . . . traded or executed on a [DCM].” 7
U.S.C. § 2(a)(1)(A). This Court agrees with and adopts the view that if “event contracts are
swaps under the Act, . . . the scope of field preemption [is] the regulation of trading on a
DCM.” Flaherty, 2026 WL 924004, at *4. Defendants’ enforcement of Arizona’s gambling
laws therefore violates the Supremacy Clause of the United States Constitution, U.S. Const.
art. VI, cl. 2, due to the CFTC’s exclusive jurisdiction over DCMs.
2. 	The Court finds that the CFTC has clearly shown that it will suffer irreparable
harm 	absent 	an 	injunction. 	A 	violation 	of 	the 	Supremacy 	Clause 	itself 	creates 	a
presumption of irreparable harm. See United States v. California, 921 F.3d 865, 893 (9th
Cir. 2019) (“[P]reventing a violation of the Supremacy Clause serves the public interest.”).
The United States Supreme Court confirmed this proposition in Arizona, 567 U.S. at 416,
where the Court affirmed in part a preliminary injunction issued based on a finding of
irreparable harm that would be caused by the enforcement of preempted state law.
3. 	The Court finds that the balance of equities favors the CFTC and that a
temporary restraining order is in the public’s interest. See Leiva-Perez v. Holder, 640 F.3d
962, 970 (9th Cir. 2011) (citing Nken v. Holder, 556 U.S. 418, 435 (2009)) (holding that
the balance of equities and public interest factors “merge where, as is the case here, the
government is the opposing party”). “[I]t would not be equitable or in the public’s interest
to allow the state to continue to violate the requirements of federal law.” Cal. Pharmacists
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Ass’n v. Maxwell-Jolly, 563 F.3d 847, 852-53 (9th Cir. 2009), vacated and remanded on
other grounds sub nom., Douglas v. Indep. Living Ctr. of S. Cal., 565 U.S. 606 (2012).
4. 	The Court finds that there is no adequate remedy at law. See Morales v. Trans
World Airlines, Inc., 504 U.S. 374, 381-83 (1992). Because the CFTC is not a part of the
state court criminal proceedings against Kalshi, it cannot protect its exclusive jurisdiction
over Kalshi’s DCM.
For these reasons, the Court finds that the Winter factors are satisfied, so it will grant
the CFTC’s Motion (Doc. 49).
The Court will not require the CFTC to post bond because “[t]he United States, its
officers, and its agencies are not required to give security.” Fed. R. Civ. P. 65(c).
IT IS THEREFORE ORDERED that the CFTC’s Motion (part of Doc. 49) is
GRANTED 	insofar 	as 	it 	requests 	a 	temporary 	restraining 	order. 	The 	Motion 	for
Preliminary Injunction (part of Doc. 49) remains pending.
IT IS FURTHER ORDERED that, pursuant to Federal Rule of Civil Procedure
65, Defendants are temporarily enjoined and restrained from enforcing Arizona’s gambling
laws, A.R.S. §§ 5-1301 et seq., through any criminal or civil enforcement actions related
to event contracts listed on CFTC-regulated DCMs.
IT IS FINALLY ORDERED that this Temporary Restraining Order will remain
in effect until April 24, 2026, at 11:59 p.m., (Arizona time).
Dated this 10th day of April 2026.
/s/ Michael T. Liburdi
United States District Judge
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