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 the state cannot proceed with an arraignment of Kalshi as planned, citing that Arizona's actions may violate the Supremacy Clause. The judge granted a temporary restraining order for two weeks, noting that there is a pending motion for a preliminary injunction that could extend this order.
The Commodity Futures Trading Commission had argued that Arizona's gambling laws are preempted by the Commodity Exchange Act. The regulator's chair, Michael Selig, welcomed the judge's decision, stating that Arizona's use of state criminal law against companies complying with federal law sets a dangerous precedent. The case revolves around the classification of prediction markets, with the CFTC arguing that they are swaps subject to federal supervision.
This issue 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 will hold a hearing on a consolidated case next week, allowing providers and other parties to present their arguments.