DOJ and CFTC seek to block Arkansas action against Kalshi

The US Department of Justice and Commodity Futures Trading Commission have sued Arkansas and Attorney General Tim Griffin to stop the state from enforcing its gambling laws against Kalshi and other federally regulated market participants. The Nov. 12 complaint seeks a ruling that federal law displaces Arkansas law for transactions conducted on CFTC-regulated exchanges, plus preliminary and permanent injunctions.

Filed in the US District Court for the Eastern District of Arkansas as USA v. Arkansas, State of, the case is numbered 4:26-cv-01255. The requested order would reach beyond Arkansas’s pending case against Kalshi, covering state investigations and enforcement involving regulated entities, their affiliates and partners, and contracts listed, offered or executed on regulated markets.

The federal government’s central argument is that event contracts whose payouts turn on specified outcomes are swaps under the Commodity Exchange Act. It says the CFTC has exclusive jurisdiction over such transactions when they trade on designated contract markets, and that excluding Arkansas residents would conflict with federal requirements for impartial access to those markets.

The agencies also contend that Arkansas enforcement would disrupt the federal process under which exchanges self-certify that listed contracts comply with applicable law and regulation. The CFTC has said Congress chose a national framework for commodity-derivatives markets rather than a patchwork of state rules.

As we reported Nov. 4, Griffin’s state lawsuit accused Kalshi of operating an illegal gambling platform in Arkansas and sought restitution, penalties, taxes and injunctive relief under the Arkansas Deceptive Trade Practices Act. Griffin alleged that the platform accepted wagers on elections, reality shows and football, including from Arkansas consumers as young as 18, without the licences, oversight, restrictions or tax payments required of lawful gambling operators in the state.

Griffin has rejected the distinction between prediction markets and gambling. “Arkansas law is concerned with substance, not semantics,” he said, arguing that wagering on whether the Razorbacks win or lose is gambling.

The new federal action falls within a wider clash over state gambling laws and federally supervised event-contract markets. The CFTC has previously brought actions seeking to block state restrictions, including in New Mexico and Utah, and said in October that it had initiated legal proceedings against nine other states and filed briefs in four federal appeals courts and one state supreme court.

The judicial record is mixed. On April 6, the Third Circuit affirmed a preliminary injunction for Kalshi in New Jersey, holding that its sports-related event contracts were swaps traded on a CFTC-licensed designated contract market and that the Commodity Exchange Act pre-empted directly conflicting state laws. But on Nov. 10, US District Judge Colleen McMahon denied Novig’s request for a preliminary injunction, concluding at that stage that its sports contracts were not swaps under the Act.

Kalshi’s exchange was certified as a designated contract market by the CFTC in 2020 after a nine-month review. The company later began offering sports-related contracts in January 2025, and the Third Circuit said the CFTC had not found those contracts contrary to the public interest.

The Arkansas federal case now asks the court to decide whether the state may apply its gambling laws to that federally regulated market activity.