Mayes disagrees with judge’s pause to Kalshi criminal case

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(The Center Square) - Attorney General Kris Mayes’ office said it disagreed with a temporary restraining order that blocks Arizona’s laws against predictive market operators and its criminal investigation into the Kalshi company.

“We are evaluating [the] next steps,” Richie Taylor, the communications director for Mayes’ office, said, answering The Center Square's questions by email this week.

An Arizona federal judge said last week that the restraining order will remain in place until April 24.

U.S. District Judge Michael Liburdi’s decision comes after the Commodity Futures Trading Commission filed a complaint against Arizona, requesting an injunction. The federal agency also filed complaints against Connecticut and Illinois for attempting to regulate predictive market operators.

In his decision, Liburdi said the federal government could intervene in the case because Arizona was interfering with federal law. The Commodity Exchange Act gives the CFTC the ability to exercise “exclusive jurisdiction” over financial markets, the judge said.

Before issuing this temporary restraining order, Liburdi denied Kalshi’s request for a temporary restraining order because a federal court can't stop ongoing state proceedings. The judge cited the Anti-Injunction Act.

However, when the federal government became involved, Liburdi could legally intervene.

Liburdi also issued the temporary restraining order because he said CTFC “has made a clear showing that it is likely to succeed on the merits of its claim that Arizona’s gambling laws are preempted by the Commodity Exchange Act.”

“The CFTC has demonstrated a reasonable chance of success in showing that the Act, at a minimum, field preempts Arizona law,” the judge wrote.

Liburdi also found that Arizona was violating the U.S. Constitution’s supremacy clause, and the federal government showed it would “suffer irreparable harm absent an injunction.” The clause says federal law takes precedence over conflicting state laws.

“The Court finds that the balance of equities favors the CFTC and that a temporary restraining order is in the public’s interest,” he said.

After the judge’s ruling, CFTC Chairman Michael Selig said the CFTC appreciated “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 sends a clear message that intimidation is not an acceptable tactic to circumvent federal law,” he said.

Robert DeNault, a lawyer for Kalshi, said on social media that the federally-regulated company appreciated CFTC “asserting its exclusive jurisdiction over [its] exchange, and the court’s careful consideration of the issues.”

“Under the U.S. Constitution, federal law is supreme,” DeNault said, calling the ruling “a step in the right direction.”