Judge Halts Arizona’s Criminal Case Against Kalshi

Support from the Commodity Futures Trading Commission is already paying dividends for the prediction industry.

The federal regulator was awarded a temporary restraining order against Arizona from a District Court this week. The ruling means that the state’s Attorney General’s office will need to halt its criminal prosecution of Kalshi, which was set to begin on April 13. 

The state had accused the operator of illegally offering sports betting, but will now need to wait before prosecuting the case.

The order will be in place until April 25, shortly before a hearing on the CFTC’s preliminary injunction. 

CFTC head celebrates win, rips Arizona

CFTC Chairman Michael Selig has led the regulator to stand fully behind the prediction industry since taking over the role in late December. Despite promising to allow the courts to decide on the legality of sports markets, it has now promised to offer legal support to the industry. 

Selig didn’t hold back in a statement issued after the favorable ruling.

The CFTC appreciates the court’s careful consideration of these important legal questions and the court’s decision to preserve the status quo. 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.

Crucial win for the prediction industry

While Kalshi was the biggest winner from the recent ruling against Arizona, the entire prediction industry can celebrate.

In the ruling, the Court determined that the industry was protected under the Commodity Exchange Act, which supersedes any state gambling laws. This has been at the center of the debate around sports prediction markets, keeping them from being classified as a form of gambling. 

While other courts had previously rejected the argument, the recent wins show the tide may be turning in favor of prediction operators.

Will sinking poll numbers end CFTC support?

As strong as Selig’s rhetoric has been in support of prediction markets, there is reason to question it.

The prediction industry has been growing increasingly unpopular among conservatives, who see it as a dangerous form of unregulated gambling. The White House has framed many of those lawmakers as “greedy,” driving a divide in the party when it can afford it least.

As a result, the President may need to choose between holding onto power and turning against the prediction industry. That doesn’t mean a full ban, but requiring further regulation could go a long way in states like Utah, which has moral concerns over prediction markets. 

Even if the support lasts through the election, Congress turning blue could be almost as dangerous. 

While the Arizona ruling seems to show the tide turning in favor of prediction markets, the chance of it lasting through the fall remains unlikely.