NEW YORK, April 10 (Reuters) - A federal judge on Friday blocked Arizona from continuing its criminal case against prediction market Kalshi, according to the Commodity Futures Trading Commission, which sued to prevent states from regulating the industry.
The CFTC announced the ruling in a press release following a hearing before U.S. District Judge Michael Liburdi in Arizona.
The agency said the court granted its request for a temporary restraining order barring the state from continuing to pursue criminal charges against CFTC-regulated designated contract markets.
“Arizona’s decision to weaponize state criminal law against companies that comply with federal law sets a dangerous precedent, and the court’s order today sends a clear message that intimidation is not an acceptable tactic to circumvent federal law," CFTC Chairman Michael S. Selig said in a statement.
Kalshi attorney Robert Denault praised the ruling in a social media post, saying "federal law is supreme" under the U.S. Constitution.
The Arizona Attorney General's Office did not immediately respond to an email seeking comment on the ruling.
The criminal case against Kalshi is the first against the company by a state amid an escalating battle between state gaming regulators and prediction market operators.
President Donald Trump's administration sued Arizona, Connecticut and Illinois on April 2 to stop what it called their unlawful efforts to regulate prediction markets because they may violate state gambling laws.
Attempts by states to shut down "event contracts" offered by companies such as Kalshi, Polymarket, Crypto.com and Robinhood (HOOD.O) violate the CFTC's exclusive authority to regulate national swaps markets, the government said.
Arizona countered in a court filing federal law does not strip states of their "traditional power over sports betting."
Arizona Attorney General Kris Mayes filed criminal charges against Kalshi on March 17, accusing it of operating an illegal gambling business and unlawfully allowing people to place bets on elections.
Kalshi denied wrongdoing after the charges were filed and said its business was different from sportsbooks and casinos.
(Reporting by Jack Queen in New York; Editing by Chris Reese and William Mallard)
