On Friday, a federal judge issued a temporary restraining order preventing Arizona from continuing its criminal case against Kalshi, siding with the Commodity Futures Trading Commission.
Federal Court Halts Arizona's Case Against Kalshi
The ruling followed a hearing before U.S. District Judge Michael Liburdi, with the CFTC confirming the decision in a press release.
The order blocks Arizona from prosecuting entities regulated as designated contract markets under federal law.
CFTC Argues Federal Authority Over Prediction Markets
The CFTC has maintained that prediction markets — including event-based contracts tied to elections — fall under its exclusive oversight as part of the national derivatives framework.
"Arizona's decision to weaponize state criminal law against companies that comply with federal law sets a dangerous precedent," CFTC Chairman Michael S. Selig said. "The court's order today sends a clear message that intimidation is not an acceptable tactic to circumvent federal law."
Kalshi's attorney, Robert Denault, echoed that stance, stating on X that "federal law is supreme" under the U.S. Constitution.
States Push Back, Cite Gambling Authority
Arizona Attorney General Kris Mayes had filed criminal charges against Kalshi in March, accusing the company of operating an illegal gambling business and facilitating bets on elections.
State officials argue that federal law does not override their traditional authority to regulate gambling, including sports betting.
High-Stakes Clash With Industry-Wide Implications
The case marks the first criminal action by a state against a prediction market operator and comes amid a broader federal challenge against state efforts in Arizona, Connecticut and Illinois.
The outcome could have sweeping implications for platforms like Polymarket and Robinhood (NASDAQ:HOOD), as regulators battle over the future of event-based trading in the U.S.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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