In a recent ruling, a federal judge in Arizona has temporarily halted the state's ability to bring criminal charges against Kalshi, a prediction market provider. This decision comes in response to a motion filed by the Commodity Futures Trading Commission. District Judge Michael Liburdi stated that Arizona cannot proceed with an arraignment of Kalshi as previously scheduled.
The state had announced plans to file 20 criminal charges against Kalshi for allegedly violating Arizona law by offering betting products. The judge's ruling noted that the CFTC has demonstrated a likelihood of succeeding in its claim that Arizona's gambling laws are preempted by federal law.
As a result, Arizona's pursuit of state action could potentially violate the Supremacy Clause. The temporary restraining order will remain in effect for two weeks, with a pending motion for a preliminary injunction that could extend the order if granted.
The CFTC Chair expressed appreciation for the judge's decision, stating that Arizona's use of state criminal law against companies complying with federal law sets a dangerous precedent. The CFTC has argued that prediction markets, or event contracts, fall under its supervision as swaps, and that federal law takes precedence over state law.
This view has yielded 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 providers and other parties to present their arguments.