In a recent ruling, a federal judge has temporarily blocked Arizona's attempt 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 of the District of Arizona ruled that Arizona cannot proceed with an arraignment of Kalshi as scheduled. The state had announced plans to file 20 criminal charges against Kalshi, alleging that the company's offerings violated Arizona law. The judge's ruling stated that the CFTC has shown it is likely to succeed in its claim that Arizona's gambling laws are preempted by the Commodity Exchange Act. Proceeding with state action could potentially violate the Supremacy Clause, leading the judge to grant a temporary restraining order for two weeks.
A pending motion for a preliminary injunction may extend this order. The CFTC Chair expressed appreciation for the judge's decision, stating that Arizona's use of state criminal law against companies complying with federal law sets a dangerous precedent. The CFTC has argued that prediction markets are subject to federal supervision, and its role preempts state law. This view has seen mixed results in court, with federal courts having different outcomes than state courts.
The Ninth Circuit Court of Appeals will hold a hearing on a consolidated case next week, allowing various providers to argue their positions.