In response to a motion filed by the Commodity Futures Trading Commission, a federal judge has temporarily barred Arizona from pursuing criminal charges against Kalshi, a provider of prediction markets. District Judge Michael Liburdi of the District of Arizona made this ruling on Friday, stating that Arizona cannot proceed with the scheduled arraignment of Kalshi on Monday, April 13. This decision comes after Arizona announced plans to file 20 criminal charges against Kalshi last month, alleging that the company's offerings violated state law. The judge's ruling noted 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.
As a result, Arizona's pursuit of state action may violate the Supremacy Clause, leading the judge to grant a temporary restraining order for a period of two weeks. Additionally, a pending motion for a preliminary injunction may extend this order. The CFTC Chair, Michael Selig, 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, also known as event contracts, are subject to federal supervision and that its role preempts state law.
This viewpoint 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 various providers and parties to present their arguments.