In a recent ruling, a federal judge in Arizona has granted a temporary reprieve to Kalshi, a prediction market provider, by blocking the state of Arizona from pursuing criminal charges. This decision comes in response to a motion filed by the Commodity Futures Trading Commission.
The ruling, issued by District Judge Michael Liburdi, prevents Arizona from proceeding with an arraignment of Kalshi that was scheduled for April 13. Arizona had previously announced its intention to file 20 criminal charges against Kalshi, alleging that the company's offerings violated state law.
However, Judge Liburdi found that the Commodity Futures Trading Commission is likely to succeed in its claim that Arizona's gambling laws are preempted by federal law. The judge's decision, which grants a temporary restraining order for two weeks, also notes that proceeding with state action could violate the Supremacy Clause.
The Commodity Futures Trading Commission has welcomed the judge's decision, with Chair Michael Selig stating that Arizona's attempt to use state criminal law against companies complying with federal law sets a dangerous precedent. The ruling is part of an ongoing dispute between the Commodity Futures Trading Commission and several states, including Arizona, over the regulation of prediction markets. While state courts have often sided with states in such cases, federal courts have produced mixed results. The Third Circuit Court of Appeals recently ruled that prediction markets are subject to Commodity Futures Trading Commission rule, while the Ninth Circuit Court of Appeals declined to intervene in a similar case in Nevada.
Judge Liburdi's decision to grant the Commodity Futures Trading Commission's motion to block Arizona's state action against Kalshi comes two days after he denied Kalshi's own motion for a preliminary injunction against the state.