In a recent ruling, a federal judge in Arizona has granted a temporary restraining order, preventing 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 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 found that the CFTC is likely to succeed in its claim that Arizona's gambling laws are preempted by the Commodity Exchange Act, and that proceeding with state action could violate the Supremacy Clause.
The temporary restraining order is in effect for two weeks, and a pending motion for a preliminary injunction could extend this period. The CFTC has welcomed the judge's decision, with Chair Michael Selig 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 are subject to federal supervision, and that its role preempts state law. The issue has seen mixed results in court, with state courts often siding with states, while federal courts have had varying outcomes.
The Ninth Circuit Court of Appeals is set to hold a hearing on a consolidated case next week, allowing providers and other parties to argue their positions.