In a recent ruling, a federal judge in Arizona has temporarily blocked the state from filing criminal charges against Kalshi, a prediction market provider. This decision comes as a response to a motion filed by the Commodity Futures Trading Commission. District Judge Michael Liburdi granted the order, citing that the CFTC is likely to succeed in its claim that Arizona's gambling laws are preempted by federal law. The ruling prevents Arizona from proceeding with an arraignment of Kalshi, which was scheduled for Monday, April 13.
The state had announced plans to file 20 criminal charges against Kalshi for allegedly offering betting products in violation of state law. The judge's decision noted that allowing Arizona to proceed with the state action could violate the Supremacy Clause. The temporary restraining order is in effect for two weeks, with a pending motion for a preliminary injunction that could extend the order.
The CFTC has welcomed the judge's decision, with Chair Michael Selig stating that it sends a clear message against using state criminal law to intimidate companies that comply with federal law. The case is part of a larger dispute over the regulation of prediction markets, with the CFTC arguing that these markets are subject to federal supervision. The issue has seen mixed results in court, with some state courts 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 parties to argue their positions.