Judge issues TRO on sports swaps

An Arizona federal judge temporarily blocked the state from prosecuting Kalshi and other federally regulated prediction markets, siding with the Commodity Futures Trading Commission on April 10. (cftc.gov) The order came from U.S. District Judge Michael T. Liburdi in Phoenix after the Commodity Futures Trading Commission asked for emergency relief in a consolidated case against Arizona. CourtListener shows Liburdi set the temporary restraining order hearing for April 10 in *KalshiEX LLC v. Johnson*, No. 2:26-cv-01715. (courtlistener.com) (cftc.gov) At the center of the fight are event contracts, which let traders buy “yes” or “no” positions on whether something will happen by a set date. The Third Circuit described them as derivatives whose prices move with the market’s view of an event’s likelihood, from earthquakes to sports results. (ca3.uscourts.gov) In a precedential opinion issued April 6, the U.S. Court of Appeals for the Third Circuit said Kalshi had shown a reasonable chance of proving that its sports-related event contracts are “swaps” under the Commodity Exchange Act and that federal law preempts conflicting state gambling rules. The panel was reviewing New Jersey’s cease-and-desist order, which had threatened penalties including fourth-degree criminal exposure and fines up to $100,000. (ca3.uscourts.gov) (law.justia.com) Liburdi’s Arizona order leaned on that Third Circuit reasoning. Industry coverage citing the court order said the judge found the Commodity Futures Trading Commission likely to succeed on its preemption claim and treated the listed sports event contracts as swaps within the federal statute. (legalsportsreport.com) (thegamingboardroom.com) That matters because the Commodity Exchange Act gives the Commodity Futures Trading Commission exclusive authority over federally approved designated contract markets, the exchanges that list these contracts. The commission said Arizona was trying to use state criminal law to regulate markets that federal law already covers. (cftc.gov) (apnews.com) Arizona has argued the contracts look like sports betting and should still be subject to state gambling law. Attorney General Kris Mayes’ office said it disagreed with the pause in the criminal case, according to The Center Square, after the state had moved against Kalshi over alleged violations of Arizona gambling statutes. (thecentersquare.com) (apnews.com) The temporary restraining order does not end the case. Reporting on the Arizona docket said the order runs to April 25 and that Liburdi set a preliminary injunction hearing for May 6, giving the court a near-term chance to say whether the federal block should last longer. (thegamingboardroom.com) (covers.com) The separate reference in your prompt to a “FICA judgment” criticizing enforcement overreach could not be verified from accessible primary sources tied to this Arizona litigation. I found the Arizona restraining-order record, the Third Circuit’s April 6 opinion, and news coverage of Arizona’s response, but not a substantiated FICA ruling in the same thread. (courtlistener.com) (pacer.uscourts.gov)