A federal judge has issued a temporary order preventing Arizona from pursuing criminal charges against Kalshi, a prediction market provider. This decision follows a motion filed by the Commodity Futures Trading Commission (CFTC), which argues that Kalshi’s operations fall under federal jurisdiction.
District Judge Michael Liburdi ruled on Friday that the state cannot proceed with an arraignment scheduled for April 13. Arizona had previously announced plans to file 20 criminal charges against Kalshi, alleging that the company was offering betting products in violation of state law.
In his ruling, Judge Liburdi stated, “Defendants are temporarily restrained and enjoined from enforcing Arizona’s gambling laws in any criminal or civil enforcement actions related to contracts listed on CFTC-regulated designated contract markets.” This decision was confirmed by Stefan Schropp, senior regulatory counsel at Paradigm.
CFTC Chair Michael Selig expressed gratitude for the ruling, highlighting concerns about Arizona’s use of state criminal law against compliant federal entities. He stated, “The court’s order today sends a clear message that intimidation is not an acceptable tactic to circumvent federal law.”
The CFTC has initiated legal action against Arizona and two other states, asserting that prediction markets, also known as event contracts, should be classified as swaps under federal oversight, thereby preempting state law. This legal interpretation has yielded mixed outcomes in various courts.
While some state courts have favored state authority—such as a Nevada court that temporarily blocked Kalshi—federal courts have shown differing interpretations. Recently, the Third Circuit Court of Appeals ruled that prediction markets are indeed subject to CFTC regulations, leaving the decision on whether to restrict sports-related offerings to the agency’s discretion.
The Ninth Circuit Court of Appeals has opted not to intervene in the Nevada case but will hold a hearing next week to consider a consolidated case involving multiple providers and stakeholders.
Judge Liburdi’s decision to grant the CFTC’s motion came just two days after he denied a separate motion from Kalshi seeking a preliminary injunction against Arizona’s actions, although the arguments presented were distinct.
A federal judge has temporarily halted Arizona's criminal charges against Kalshi, a prediction market provider, following a motion from the CFTC. The ruling emphasizes the jurisdictional conflict between state and federal regulations regarding prediction markets.