In a recent ruling, a federal judge in Arizona has temporarily halted the state's plans to bring criminal charges against prediction market provider Kalshi, in response to a motion filed by the Commodity Futures Trading Commission. The ruling, issued by District Judge Michael Liburdi, prevents Arizona from proceeding with an arraignment of Kalshi that was scheduled for Monday, April 13.
This decision comes after Arizona announced last month that it would be filing 20 criminal charges against Kalshi for allegedly offering betting products that violate state law. The judge's ruling stated that the Commodity Futures Trading Commission has made a strong case that Arizona's gambling laws are likely preempted by the Commodity Exchange Act. As a result, Arizona's pursuit of a state action could potentially violate the Supremacy Clause, leading the judge to grant a temporary restraining order for a period of two weeks.
Additionally, a pending motion for a preliminary injunction could further extend this order. The judge's decision was welcomed by CFTC Chair Michael Selig, who emphasized that using state criminal law to target companies that comply with federal law sets a dangerous precedent. The CFTC has argued that prediction markets, also known as event contracts, are subject to federal supervision and that state law should not apply.
This view has seen mixed results in court, with state courts often siding with states and federal courts producing different outcomes. The Ninth Circuit Court of Appeals is set to hold a hearing on a consolidated case next week, allowing various providers and parties to present their arguments.