A federal judge has temporarily stopped the state of Arizona from bringing criminal charges against prediction market operator Kalshi, delivering a short-term legal win for the company and federal regulators.
Michael Liburdi, serving in the U.S. District Court for the District of Arizona, issued a temporary restraining order preventing Arizona officials from proceeding with an arraignment scheduled for April 13. The state had previously announced plans to file 20 criminal charges against Kalshi, alleging that its event-based contracts violated state gambling laws.
CFTC Argues Federal Authority Overrides State Laws
The restraining order followed a motion from the Commodity Futures Trading Commission, which argued that prediction markets qualify as financial swaps regulated at the federal level.
Michael Selig praised the ruling, stating that using state criminal law against federally compliant companies could create a dangerous precedent. The regulator has filed lawsuits against multiple states, asserting that its authority over designated contract markets takes precedence over state-level gambling restrictions.
Mixed Court Outcomes Highlight Ongoing Legal Uncertainty
Legal outcomes surrounding prediction markets remain inconsistent across jurisdictions. Courts in Nevada previously allowed state regulators to temporarily block Kalshi operations, while the U.S. Court of Appeals for the Third Circuit recently ruled that prediction markets fall under federal supervision.
Meanwhile, the U.S. Court of Appeals for the Ninth Circuit declined to intervene in the Nevada dispute but is expected to hear arguments next week in a consolidated case involving multiple industry participants.
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