A federal judge temporarily blocked Arizona’s criminal lawsuit against Kalshi, strengthening the outlook for federal oversight of prediction markets

U.S. federal judge Michael Liburdi ruled on April 10 that Arizona will be temporarily barred from bringing criminal charges against prediction market platform Kalshi. The ruling responded to a motion from the U.S. Commodity Futures Trading Commission (CFTC), pausing the arraignment hearing scheduled for next Monday.

Arizona filed 20 criminal counts

Arizona prosecutors previously filed 20 misdemeanor charges against Kalshi, alleging it illegally accepted bets on political outcomes, college sports events, and individual player performance. Arizona was the first state to bring criminal charges against Kalshi. Under the state’s laws, operating unlicensed gambling businesses and election betting is prohibited.

CFTC argues that federal oversight takes priority

The CFTC sued Arizona and two other states, arguing that prediction markets (also known as event contracts) are swap transactions that fall under the jurisdiction of federal regulators, and that federal regulatory authority takes precedence over state law. Kalshi, meanwhile, has insisted that it is a financial market rather than a gambling platform and should be regulated only by the CFTC.

This argument gained additional support this week—the U.S. Court of Appeals for the Third Circuit ruled that prediction markets are indeed subject to CFTC rules, and that it is up to the CFTC to decide whether operators may offer sports-related products.

Impact on the prediction market industry

The ruling is also significant for crypto prediction market platforms such as Polymarket. If a federal court ultimately confirms the federal regulatory status of prediction markets, it would effectively prevent states from suing prediction market operators under gambling regulations, providing a clearer legal environment for the entire industry.

That said, the case has not been finally decided yet. The judge has only temporarily blocked Arizona’s case proceedings for now, and the ultimate outcome remains to be determined in further proceedings.

This article, “U.S. federal judge temporarily blocks Arizona’s criminal case against Kalshi, strengthening the federal regulatory status of prediction markets,” first appeared on LianNews ABMedia.