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 request from the Commodity Futures Trading Commission.
District Judge Michael Liburdi of the District of Arizona ruled Friday that Arizona cannot proceed with an arraignment on Kalshi as scheduled on Monday, April 13. Arizona announced last month that it would bring 20 criminal charges against Kalshi for offering what the state claimed were gambling products in violation of Arizona law.
“Defendants are temporarily enjoined from enforcing AZ gambling laws in connection with any criminal or civil action against any contract listed on CFTC-regulated markets. [designated contract markets]” the judge ruled in the temporary restraining order, according to Stefan Schropp, Paradigm’s senior regulatory advisor.
In a statement Friday, CFTC Chairman Michael Selig said the regulator “appreciates” the judge’s decision.
“Arizona’s decision to use state criminal law as a weapon 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-driven contracts, are exchanges subject to the federal agency’s supervision and that its role preempts state law.
This is a view that has produced largely mixed results in court; 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 moved forward.
Federal courts have obtained different results; The Third Circuit Court of Appeals ruled earlier this week that prediction markets are subject to CFTC rules, and it was up to the CFTC to decide whether or not it wanted to block providers from offering sports-related products.
The Ninth Circuit Court of Appeals declined to weigh in on Nevada’s aforementioned suit, allowing that state court to block Kalshi, but it will hold a hearing next week on a consolidated case allowing various providers and other parties to litigate.
Arizona Judge Liburdi granted the CFTC’s motion to block the State of Arizona’s action against Kalshi two days after denying Kalshi’s own motion for a preliminary injunction against the State.
