Arkansas sues Kalshi over alleged illegal gambling platform

Arkansas Attorney General Tim Griffin has sued KalshiEX LLC and Kalshi Inc., alleging that the prediction-market operator ran an illegal, unregulated gambling platform in the state. The lawsuit says Arkansas residents, including people as young as 18, could wager real money on sports and entertainment events through Kalshi.

The state is seeking restitution, penalties, taxes and an injunction under the Arkansas Deceptive Trade Practices Act. Griffin alleges that Kalshi did not obtain gambling licences, submit to state oversight, follow gambling restrictions or pay taxes required of lawful gambling operators.

Kalshi describes its products as event contracts, allowing users to take positions on real-world outcomes including elections, reality competition shows and football games. But Griffin argued that Arkansas law concerns “substance, not semantics,” saying that a wager on whether the Razorbacks win or lose is gambling and that unregulated gambling is prohibited in the state.

The attorney general also pointed to Kalshi’s responsible-gambling measures and promotion of addiction resources as evidence that the company recognises the risks on its platform. Griffin said those risks include excessive wagering, financial losses, depression and other mental-health harms.

Kalshi has argued in other state disputes that its contracts are financial derivatives within the Commodity Futures Trading Commission’s exclusive jurisdiction, rather than gambling products subject to state law. That position has received support in New Jersey: in April, the U.S. Court of Appeals for the Third Circuit held that Kalshi’s sports-related contracts traded on a CFTC-licensed market were swaps under CFTC jurisdiction and that federal law pre-empted otherwise applicable New Jersey law.

The Arkansas case adds to a widening clash between state gambling regulators and federal derivatives oversight. The CFTC said this week that it had initiated legal proceedings against Utah and nine other states over their efforts involving prediction markets, maintaining that Congress gave it sole responsibility for commodity derivatives. California, joined by 36 other attorneys general, has taken the opposing view in support of Utah’s authority to enforce state sports-gaming and gambling laws against Kalshi.

Utah has separately brought civil and criminal actions against Kalshi and its founders, as we reported in October. Arkansas now joins Arizona, Connecticut, Massachusetts, Michigan and Nevada among states that have sued, brought charges or restricted access to Kalshi’s platform.