In a recent ruling, a federal judge in Arizona has temporarily blocked the state from filing criminal charges against Kalshi, a prediction market provider. The move comes in response to a motion filed by the Commodity Futures Trading Commission.
The decision, made by District Judge Michael Liburdi, prevents Arizona from proceeding with an arraignment of Kalshi that was scheduled for April 13. Arizona had announced plans to file 20 criminal charges against Kalshi, alleging that the company's products violated state betting laws.
However, the judge ruled that the Commodity Futures Trading Commission has a strong case that Arizona's gambling laws are preempted by federal law. The judge granted a temporary restraining order, which will remain in place for two weeks, citing concerns that Arizona's actions could violate the Supremacy Clause.
The ruling also noted that there is a pending motion for a preliminary injunction, which could extend the temporary order. The Commodity Futures Trading Commission welcomed the decision, with Chair Michael Selig stating that the regulator 'appreciated' the judge's ruling. Selig argued that Arizona's attempt to use state criminal law against companies complying with federal law sets a dangerous precedent. The case is part of a broader dispute between the Commodity Futures Trading Commission and several states over the regulation of prediction markets.
While state courts have often sided with states, federal courts have delivered mixed results. The Third Circuit Court of Appeals recently ruled that prediction markets fall under the Commodity Futures Trading Commission's jurisdiction, while the Ninth Circuit Court of Appeals declined to intervene in a similar case in Nevada. Judge Liburdi's ruling comes two days after he denied Kalshi's motion for a preliminary injunction against Arizona, with the parties arguing on different grounds.