In a recent ruling, a federal judge in Arizona has temporarily blocked the state from pursuing criminal charges against Kalshi, a prediction market provider. The decision was made in response to a motion filed by the Commodity Futures Trading Commission. District Judge Michael Liburdi ruled that Arizona is not allowed to proceed with an arraignment of Kalshi, which was scheduled for April 13. The state had announced plans to file 20 criminal charges against Kalshi, alleging that the company offered betting products in violation of Arizona law.
However, the judge found that the CFTC has a strong case that Arizona's gambling laws are preempted by federal law, specifically the Commodity Exchange Act. The judge granted a temporary restraining order, effective for two weeks, citing concerns that Arizona's actions could violate the Supremacy Clause. The CFTC has welcomed the decision, with Chair Michael Selig stating that the regulator appreciates the judge's ruling. The case is part of a broader dispute between the CFTC and several states over the regulation of prediction markets, also known as event contracts.
While state courts have often sided with states, federal courts have had mixed results. The CFTC argues that prediction markets are subject to federal supervision, while states claim that they have the authority to regulate these markets under their own laws.