In a recent ruling, a federal judge in Arizona has halted the state's attempt to bring criminal charges against Kalshi, a prediction market provider, at least for the time being. This 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 planned, citing that the state's actions may violate the Supremacy Clause.
The judge noted that the CFTC has a strong likelihood of succeeding in its claim that Arizona's gambling laws are preempted by federal law. As a result, a temporary restraining order has been granted for two weeks, with a pending motion for a preliminary injunction that could extend this order. The CFTC has welcomed the judge's decision, stating that Arizona's use of state criminal law against companies complying with federal law sets a dangerous precedent. The regulator argues that prediction markets are swaps subject to federal supervision, which preempts state law.
This issue has seen mixed results in court, with state courts often siding with states and federal courts delivering different outcomes. The Ninth Circuit Court of Appeals is set to hold a hearing on a consolidated case involving various providers, allowing them to present their arguments.