In a recent ruling, a federal judge in Arizona has temporarily blocked the state's efforts to bring criminal charges against Kalshi, a prediction market provider. This decision comes in response to a motion filed by the Commodity Futures Trading Commission.
District Judge Michael Liburdi ruled that Arizona cannot proceed with an arraignment of Kalshi as scheduled, after the state announced plans to file 20 criminal charges against the company for allegedly violating Arizona law by offering betting products. The judge's ruling stated that the Commodity Futures Trading Commission has shown it is likely to succeed in its claim that Arizona's gambling laws are preempted by federal law.
As a result, Arizona's actions may violate the Supremacy Clause, leading the judge to grant a temporary restraining order for two weeks. The ruling also noted a pending motion for a preliminary injunction that could extend the temporary order.
In a statement, CFTC Chair Michael Selig expressed appreciation for the judge's decision, emphasizing that using state criminal law against companies complying with federal law sets a dangerous precedent. The CFTC has argued that prediction markets are subject to its supervision as swaps, and its role preempts state law. This view has seen mixed results in court, with state courts often siding with states and federal courts having different outcomes. The judge's decision to block Arizona's state action against Kalshi comes after denying Kalshi's own motion for a preliminary injunction against the state, albeit on different grounds.