Arizona Fails in Criminal Case vs. Prediction Markets Giant Kalshi
Arizona has been blocked from bringing a criminal case against Kalshi, the leader in prediction markets.
A federal judge in Arizona put a stop to the criminal case, saying that controversial prediction markets fell under the CFTC's jurisdiction.
Arizona has been arguing that predictions are the same as sports betting and should be regulated accordingly.
At a Glance:
- Federal judge blocks Arizona from charging Kalshi with gambling offenses
- Attorney General Kris Mayes had pursued charges against Kalshi
- The Grand Canyon State was the first in the U.S. to charge Kalshi
- CFTC sued Arizona in April for trying to regulate prediction markets
- Supreme Court likely to end up ruling for or against prediction regulation
Arizona loss a blow for state regulators
The Arizona Department of Gaming was left licking its wounds following the move to quash the criminal case against Kalshi.
Along with states like Nevada, Connecticut, and Illinois, Arizona has taken on the prediction markets for “illegal gambling operations”.
Arizona legalized sports betting in 2021 and now has 14 regulated sportsbooks. However, prediction markets like Kalshi are federally regulated by the Commodity & Futures Trading Commission (CFTC).
States argue that prediction markets are no different from sports betting, while the CFTC maintains they are derivatives.
Arizona ‘evaluating legal options’ after criminal case fails
Last week, Arizona officials asked a federal court to postpone the next hearing of their case. Officials wanted to see the result of a similar case brought by authorities in Nevada.
Ultimately, U.S. District Court Judge Michael Liburdi ruled against Arizona. He argued that the federal government was likely to win in any legal challenge surrounding financial markets.
The attorney-general’s spokesman added that the state was evaluating “our legal options”. In reality, this could mean waiting to see what happens with other states taking on the CFTC.
States vs. federal authorities: key battles so far
The Arizona ruling is just the latest win for the CFTC in its legal challenges. So far this year, the CFTC has launched several criminal cases against states seeking to clamp down on prediction markets.
CFTC sues Wisconsin
The CFTC is suing Wisconsin after the Badger State threatened several prediction markets for offering services there. The Wisconsin Department of Justice issued five civil suits against a host of platforms that offer services in the U.S.
New York in CFTC’s firing line
New York is taking on crypto exchanges that offer prediction markets, such as Coinbase. The familiar cease-and-desist letters were sent out, triggering an angry response from the CFTC.
The commission is seeking a “permanent injunction” against New York, which it says is ignoring “decades of [federal] precedent”.
Supreme Court could hold the key
The ongoing battle between the states and CFTC seems likely to reach a crunch point, however.
A recent Third Circuit ruling has found that Kalshi’s markets are legal under the Commodity Exchange Act.
However, the United States Court of Appeals for the Ninth Circuit seems to doubt that position. A final Supreme Court decision on who regulates prediction markets could come by the end of the year.
