In a recent ruling, District Judge Michael Liburdi of the District of Arizona has temporarily halted the state of Arizona from pressing criminal charges against Kalshi, a prediction market provider. This decision comes in response to a motion filed by the Commodity Futures Trading Commission.
Arizona had previously announced plans to file 20 criminal charges against Kalshi, alleging that the company's offerings constituted betting products that violated state law. However, Judge Liburdi's ruling stated that the CFTC has demonstrated a strong likelihood of succeeding in its claim that Arizona's gambling laws are preempted by the Commodity Exchange Act. The judge expressed concerns that Arizona's pursuit of state action could potentially violate the Supremacy Clause, leading to the issuance of a temporary restraining order for a period of two weeks.
The ruling also noted the existence of a pending motion for a preliminary injunction, which, if granted, would extend the temporary restraining order. CFTC Chair Michael Selig welcomed the judge's decision, stating that Arizona's attempt to use state criminal law against companies complying with federal law sets a dangerous precedent. The CFTC has argued that prediction markets, also known as event contracts, fall under its supervision as swaps, and that its role takes precedence over state law.
The case has yielded mixed results in various courts, with some state courts siding with the states and others, like the Third Circuit Court of Appeals, ruling in favor of the CFTC's position. The Ninth Circuit Court of Appeals has declined to intervene in a related Nevada case but is scheduled to hold a hearing on a consolidated case soon.