CFTC Forms Innovation Task Force as Judge Freezes Arizona Case

The Commodity Futures Trading Commission named Michael Pascualaqua to lead an Innovation Task Force and announced a federal judge has temporarily blocked Arizona’s criminal prosecution of prediction market operator Kalshi.

U.S. District Judge Michael Liburdi issued a temporary restraining order at the CFTC’s request, pausing a 20-count indictment that accused Kalshi of unlawful wagering and election betting. Arizona prosecutors argued the platform was an unlicensed betting site that required a state gambling license. The CFTC has filed lawsuits against Arizona and two other states seeking to bar state enforcement against platforms the agency says are federally registered event contracts subject to derivatives law.

The task force includes five members: Hank Balaban, formerly a crypto attorney at Latham & Watkins; Eugene Gonzalez IV, a former blockchain lawyer at Sidley; Sam Canavos, a prediction market consultant; Mark Fajfar, a long-serving CFTC legal official; and Dina Moussa, special counsel in the agency’s Market Participants Division. The commission said the group will help draft compliance guidance for firms working with smart contracts, artificial intelligence and prediction markets.

The agency also posted a tracker on its website outlining regulatory milestones and identified three priority innovation areas: crypto and blockchain, artificial intelligence and autonomous systems, and contracts and prediction markets.

CFTC Chairman Michael Selig criticized Arizona’s actions in a statement, writing, “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.” Kalshi attorney Robert J. DeNault welcomed the court’s order on social media, calling the pause “a step in the right direction.”

The CFTC and the Securities and Exchange Commission issued joint guidance in March on how digital tokens and related transactions may fall under federal securities laws. SEC officials have said the agencies are prepared to implement the proposed CLARITY Act and have urged congressional action. Several states, including Nevada and New Jersey, have argued that political and sports wagers on prediction platforms violate state gambling laws, and federal lawmakers are drafting bills to set clearer rules for the industry.