In a recent ruling, a US federal judge has halted Arizona's attempt to bring criminal charges against Kalshi, a prediction market provider, in response to a motion filed by the Commodity Futures Trading Commission. District Judge Michael Liburdi of the District of Arizona ruled that Arizona cannot proceed with an arraignment of Kalshi as scheduled, after the state announced plans to file 20 criminal charges against the company for allegedly offering betting products in violation of state law. The judge's decision was based on the likelihood that the Commodity Exchange Act preempts Arizona's gambling laws. The temporary restraining order, which is valid for two weeks, may be extended if a preliminary injunction is granted.
The Commodity Futures Trading Commission has argued that prediction markets, also known as event contracts, fall under its supervision as swaps, and that federal law takes precedence over state law. This ruling comes as the CFTC sues Arizona and other states over the regulation of prediction markets, with mixed results in state and federal courts. The CFTC Chair welcomed the judge's decision, stating that it sends a clear message against using state criminal law to intimidate companies complying with federal law.