In a recent ruling, a federal judge has halted Arizona's attempt to bring criminal charges against Kalshi, a prediction market provider. The decision comes after the Commodity Futures Trading Commission intervened, arguing that Arizona's actions could infringe upon federal law. District Judge Michael Liburdi stated that the CFTC has a strong case in claiming that Arizona's gambling laws are preempted by the Commodity Exchange Act, and that pursuing state action could violate the Supremacy Clause.
As a result, the judge granted a temporary restraining order, preventing Arizona from enforcing its gambling laws against Kalshi for two weeks. The CFTC Chair, Michael Selig, expressed appreciation for the judge's decision, emphasizing that using state criminal law to target companies complying with federal law sets a dangerous precedent.
The regulator believes that prediction markets, also known as event contracts, fall under its supervision as swaps, and thus are subject to federal law. This viewpoint has yielded mixed results in court, with some state courts siding with states and others supporting the CFTC's stance. The case is ongoing, with the Ninth Circuit Court of Appeals scheduled to hold a hearing on a consolidated case involving various providers and parties.