A federal judge has blocked the state of Arizona, at least temporarily, from bringing criminal charges against prediction markets provider Kalashi in response to a motion by the Commodity Futures Trading Commission.
District Judge Michael Libardi in the District of Arizona ruled Friday that Arizona could not arraign Kalshi as scheduled for Monday, April 13. Arizona announced last month that it would file 20 criminal charges against Kalshi, who the state claimed offered betting products in violation of Arizona law.
“The defendants are temporarily restrained and enjoined from enforcing AZ’s gambling laws in any criminal or civil enforcement actions for any contracts listed on a CFTC-regulated. [designated contract markets]According to Stephen Schropp, Paradigm’s senior regulatory counsel, the judge ruled in a temporary restraining order.
In a statement Friday, CFTC Chairman Michael Selig said the regulator “appreciates” the judge’s decision.
He said, “Arizona’s decision to weaponize state criminal law against federal law-abiding companies sets a dangerous precedent, and today’s court order sends a clear message that intimidation is not an acceptable tactic to circumvent federal law.”
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 supervision, and its role preempts state law.
It is an approach that has seen largely mixed results in court; State courts often side with the states, such as when a Nevada state court ruled that the Gaming Control Board could temporarily block Kalaashi while a broader case proceeded.
Federal courts have had varying results; The Third Circuit Court of Appeals ruled earlier this week that prediction markets are subject to the CFTC rule, and that it was up to the CFTC’s discretion whether to block providers from offering sports-related products.
The Ninth Circuit Court of Appeals declined to consider the aforementioned Nevada action, allowing the state court to block Kalshi, but it will hear a consolidated case next week in which different providers and other parties will be allowed to argue.
Arizona Judge Libardi granted the CFTC’s motion to halt the state of Arizona’s action against Kalshi two days after denying Kalshi’s own motion for a preliminary injunction against the state.