A federal judge has blocked the state of Arizona from bringing criminal charges against prediction market provider Kalshi, at least temporarily, in response to a motion from the Commodity Futures Trading Commission.
District Judge Michael Liburdi, in the District of Arizona, ruled Friday that Arizona cannot hold an arraignment against Kalshi as scheduled for Monday, April 13. Arizona announced last month that it would file 20 criminal charges against Kalshi for offering what the state claimed were gambling products in violation of Arizona law.
“Defendants are temporarily restricted and prohibited from enforcing AZ gaming laws in any criminal or civil enforcement action under any contract listed on the CFTC-regulated list. [designated contract markets]”the judge ruled in the temporary restraining order, according to Stefan Schropp, senior regulatory counsel at Paradigm.
In a statement Friday, CFTC Chairman Michael Selig said the regulator “appreciated” the judge’s decision.
“Arizona’s decision to weaponize state criminal law against businesses that comply with federal law sets a dangerous precedent, and today’s court order sends a clear message that intimidation is not an acceptable tactic to circumvent federal law,” he said.
The CFTC sued Arizona and two other states, arguing that prediction markets, also known as event contracts, are swaps subject to the federal agency’s oversight and that its function trumps state law.
It’s an opinion that has met with largely mixed results in the courts; State courts have often sided with the states, such as when a Nevada state court ruled that the Gaming Control Board could temporarily block Kalshi while a broader case moves forward.
Federal courts have had different results; The Third Circuit Court of Appeals ruled earlier this week that prediction markets are subject to the CFTC rule, and it was up to the CFTC to decide whether to prevent providers from offering sports-related products or not.
The Ninth Circuit Court of Appeals declined to weigh in on the aforementioned Nevada action, allowing that state court to block Kalshi, but will hold a hearing on a consolidated case next week that will allow several providers and other parties to argue.
Judge Liburdi of Arizona granted the CFTC’s motion to block the state of Arizona’s action against Kalshi two days after denying Kalshi’s motion for a preliminary injunction against the state.
