In a recent ruling, a federal judge in Arizona has temporarily barred the state from bringing 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 ruled that Arizona cannot proceed with an arraignment of Kalshi, which was scheduled for Monday, April 13. The state had previously announced plans to file 20 criminal charges against Kalshi for allegedly violating Arizona law by offering betting products. The judge's ruling stated that the Commodity Futures Trading Commission has shown it is likely to succeed in its claim that Arizona's gambling laws are preempted by federal law. The temporary restraining order will remain in effect for two weeks, with a pending motion for a preliminary injunction that could extend the order.
The judge noted that allowing Arizona to proceed with state action might violate the Supremacy Clause. The Commodity Futures Trading Commission 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 regulator argued that prediction markets, also known as event contracts, are subject to federal supervision and that state law is preempted. The case has had 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 various providers to argue their positions.