In a recent ruling, a federal judge in Arizona has temporarily barred the state from pressing criminal charges against Kalshi, a prediction market provider. The decision comes in response to a motion filed by the Commodity Futures Trading Commission.
District Judge Michael Liburdi granted the temporary restraining order, citing that the CFTC is likely to succeed in its claim that Arizona's gambling laws are preempted by federal law. The judge noted that allowing Arizona to proceed with its state action could violate the Supremacy Clause.
The temporary order will remain in effect for two weeks, with a pending motion for a preliminary injunction that could extend the order. The CFTC has welcomed the 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 revolves around the CFTC's argument that prediction markets are subject to federal supervision, which has seen mixed results in court. While some state courts have sided with states, federal courts have had varying outcomes, with the Third Circuit Court of Appeals recently ruling that prediction markets are subject to CFTC rule.