Arkansas Attorney General Tim Griffin filed a lawsuit against prediction market operator Kalshi on November 4, accusing the company of offering illegal gambling to state residents without the required licenses or regulatory oversight.
The civil complaint targets KalshiEX LLC and Kalshi Inc. It alleges violations of Arkansas gambling and consumer protection laws, including allowing customers as young as 18 to trade on sporting and entertainment outcomes.
The lawsuit comes as federal appeals courts reach conflicting conclusions about whether states can regulate sports event contracts offered by federally registered exchanges.
Griffin argues that Kalshi’s event contracts function as gambling products regardless of how the company describes them.
Arkansas requires customers to be at least 21 to open electronic wagering accounts, while Kalshi permits trading from age 18.
The attorney general also alleges that Kalshi failed to obtain gambling licenses, comply with state oversight requirements and pay applicable taxes.
“Arkansas law is concerned with substance, not semantics,” Griffin said in his November 4 announcement.
The complaint cites Kalshi’s deposit limits, self-exclusion features and gambling addiction resources as evidence that the company recognizes risks commonly associated with betting.
Filed in Independence County Circuit Court, the lawsuit includes three claims under the Arkansas Deceptive Trade Practices Act and an unjust enrichment claim.
Griffin seeks restitution, unpaid taxes, civil penalties and an injunction preventing further alleged violations. The requested penalties could reach $10,000 per violation if the court finds the relevant legal requirements were breached.
Kalshi has rejected the allegations, maintaining that its federally regulated exchange operates under nationwide rules rather than individual state gambling laws.
Arkansas filed its lawsuit during a week of setbacks for Kalshi in federal appeals courts.
On November 3, the Second Circuit denied requests from Kalshi and Coinbase to temporarily block gambling enforcement in New York and Connecticut while their appeals continue.
The following day, the Ninth Circuit declined to reconsider an earlier decision allowing Nevada to enforce its gambling laws against Kalshi’s sports contracts.
In September, the Sixth Circuit also permitted enforcement efforts in Ohio and Tennessee to proceed, rejecting Kalshi’s argument that federal regulation necessarily prevented state intervention.
However, these decisions do not establish a uniform nationwide rule.
In April, the Third Circuit ruled for Kalshi in a dispute involving New Jersey, finding that its sports event contracts qualified as swaps under federal law and were protected from state gambling enforcement.
New Jersey has asked the Supreme Court to review that decision, with support from 39 other states and the District of Columbia.
The conflicting outcomes leave prediction market operators facing different legal risks by jurisdiction.
The broader disagreement centers on the Commodity Futures Trading Commission’s authority over federally registered prediction market exchanges.
Kalshi argues that its event contracts fall under the Commodity Exchange Act, which grants the CFTC exclusive jurisdiction over certain derivatives transactions.
Several states maintain that sports event contracts amount to gambling and remain subject to their licensing requirements.
The CFTC has supported federal jurisdiction through court filings and legal challenges against state enforcement efforts.
The outcome could influence whether prediction market operators can offer sports-related contracts nationwide without obtaining separate state gambling licenses.
Arkansas is pursuing more than restrictions on Kalshi’s future operations.
By filing claims under its consumer protection statute, the state is also seeking financial remedies related to transactions the platform allegedly accepted from Arkansas residents.
That approach could create additional exposure for prediction market operators if courts determine that existing activity violated state law.
However, no court has established Kalshi’s liability in the Arkansas case, and the company’s federal regulatory arguments remain subject to ongoing litigation.
The dispute highlights the unresolved boundary between federally regulated event contracts and state gambling laws, with potentially significant consequences for expanding sports prediction markets across the United States.
Vladimir is a senior iGaming writer and editor, adept at breaking down the key details of crypto casinos and sportsbooks so players don’t have to, delivering honest, player-focused information that actually matters.
