A federal judge has denied a request from prediction market operator Kalshi to bar Arizona prosecutors from moving forward with a criminal case, alleging the company is operating an illegal betting platform in the state. 

In a decision Thursday, U.S. District Judge Michael Liburdi also denied Kalshi’s request for a ruling saying federal law trumps Arizona’s gambling laws. Liburdi said it’s too early in the case for him to rule on that issue. 

The Arizona Attorney General’s Office has charged Kalshi with 20 misdemeanor counts of wagering, alleging that the company accepted bets on political outcomes, college sports and individual player performance.

Arizona, the first state to file criminal charges against Kalshi, prohibits operating an unlicensed wagering business and betting on elections. The criminal charges mark a new front in a high-stakes legal battle over whether prediction markets should be subject to the same rules as gambling operations.

The Associated Press emailed Kalshi seeking comment on the decision. Attorney General Kris Mayes’ office declined to comment on Thursday.

An arraignment is scheduled Monday for Kalshi in Maricopa County Superior Court. The criminal case is being heard in county court because the company is charged with state criminal violations. 

Kalshi, which maintains it’s a financial marketplace rather than a gambling operation, is pressing its civil claims in federal court, arguing that it should only have to answer to the U.S. Commodity Futures Trading Commission, not the state of Arizona.

Kalshi operates by allowing customers to buy and sell “Yes” or “No” contracts tied to the probable outcome of an event. It has said its product is different from gambling operations because Kalshi’s customers engage in “swaps” between one another instead of betting against the “house.”