Arkansas Sues Kalshi, Joining a Growing List of States Targeting Prediction Markets

Arkansas has sued Kalshi, accusing the prediction market of offering an illegal, unregulated gambling platform to the state's residents, Attorney General Tim Griffin said on Wednesday.

The lawsuit, filed against KalshiEX LLC and Kalshi Inc., alleges multiple violations of the Arkansas Deceptive Trade Practices Act. The state is seeking restitution, penalties, taxes and an injunction.

"It doesn't take a genius to understand that wagering money on whether the Razorbacks win or lose is gambling," Griffin said. "And gambling on an unregulated platform is squarely prohibited by Arkansas law."

Instead of obtaining licenses and paying the taxes required of gambling operators, Kalshi opened its platform to Arkansas residents as young as 18 and encouraged them to bet on sporting and entertainment events, Griffin alleged. "Arkansas law is concerned with substance, not semantics," he said.

Griffin pointed to Kalshi's own responsible-gambling tools, including self-exclusion, deposit limits and trading breaks, along with its partnership with the National Council on Problem Gambling, as evidence that the company knows its platform carries gambling-style risks. "Although Kalshi insists that its products are not gambling, its actions speak louder than its labels," he said.

Kalshi, which is regulated by the Commodity Futures Trading Commission, has argued in other cases that its event contracts fall under exclusive federal jurisdiction and are not subject to state gambling laws.

Where the state fights stand

Arkansas is the latest of more than a dozen states to take on prediction markets. Among the most significant cases:

• Utah: The state filed felony charges against Kalshi and its co-founders, Tarek Mansour and Luana Lopes Lara, last week, alleging illegal gambling promotion. Kalshi called the charges "a crazy overreach."
• New York: Attorney General Letitia James sued Kalshi in July, seeking at least $36 billion. The CFTC responded by invoking its emergency powers to keep Kalshi operating.
• Michigan: A state judge barred Kalshi from offering sports contracts in September, threatening a $500,000 daily fine if it fails to block Michigan residents.
• Kentucky: The state sued Kalshi, Polymarket and their brokerage partners Coinbase, Robinhood and Webull in June.
• Minnesota: Kalshi sued in May to block the state's first-in-the-nation law making it a felony to operate or advertise a prediction market. In July, a federal judge blocked the ban from taking effect, finding it was likely preempted by federal law.
• Illinois: Kalshi sued the state in June over a new law requiring prediction markets to obtain sports betting licenses and pay state taxes.

Other states have also moved against prediction markets. Arizona filed criminal charges against Kalshi in March, a Washington court temporarily blocked its sports contracts in July, and Massachusetts' case is now before the state's highest court after a lower court barred Kalshi's sports contracts in January.

The CFTC has sued at least 10 states to defend what it says is its exclusive authority over prediction markets, and President Donald Trump has backed the agency, calling several state officials who challenged the platforms "scum."

Federal appeals courts are split. The Third Circuit ruled in April that New Jersey cannot regulate Kalshi's sports contracts, while the Sixth and Ninth Circuits sided with Ohio, Tennessee and Nevada. New Jersey has asked the Supreme Court to settle the question, backed by 39 other states and the District of Columbia, as well as the NFL. Kalshi's response to the petition is due November 9, and the Supreme Court is not expected to decide whether to take up the case until December at the earliest, ESPN reported.