In a recent ruling, a federal judge has temporarily blocked Arizona's attempt 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. Judge Michael Liburdi of the District of Arizona ruled that the state cannot proceed with the scheduled arraignment of Kalshi, which was set to take place on Monday, April 13. Arizona had previously announced plans to file 20 criminal charges against Kalshi, alleging that the company had violated state law by offering betting products.
However, the court has found that the CFTC is likely to succeed in its claim that Arizona's gambling laws are preempted by the Commodity Exchange Act. As a result, the judge has granted a temporary restraining order, effective for two weeks, and noted that a pending motion for a preliminary injunction could potentially extend this order.
The CFTC has welcomed the judge's decision, with Chair Michael Selig stating that Arizona's actions set a dangerous precedent and that the court's order sends a clear message that intimidation is not an acceptable tactic to circumvent federal law. The CFTC has argued that prediction markets are swaps subject to federal supervision, and that its role preempts state law. This view has yielded mixed results in court, with state courts often siding with states and federal courts producing different outcomes.
The case is ongoing, with the Ninth Circuit Court of Appeals set to hold a hearing on a consolidated case next week, allowing various providers and parties to present their arguments.