Arkansas Sues Kalshi as State Crackdown on Prediction Markets Widens

Arkansas Attorney General Tim Griffin has sued Kalshi, accusing the prediction market operator of running an illegal, unregulated gambling platform in violation of the Arkansas Deceptive Trade Practices Act. The suit, filed Wednesday against KalshiEX LLC and Kalshi Inc., seeks restitution, civil penalties, taxes and an injunction. In plain terms, Arkansas wants the company to pay what a licensed gambling operator would owe, and to stop serving state residents.

Griffin alleged Kalshi let Arkansas users as young as 18 wager on sporting and entertainment events, without obtaining licenses or paying taxes required of gambling operators. "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."

The attorney general leaned on Kalshi's own conduct as evidence. He cited the company's responsible-gambling tools — self-exclusion, deposit limits and trading breaks — and its partnership with the National Council on Problem Gambling as proof that Kalshi itself recognizes gambling-style risks on its platform. "Although Kalshi insists that its products are not gambling, its actions speak louder than its labels," Griffin said. He added: "Arkansas law is concerned with substance, not semantics." Notably absent from the complaint's framing is any engagement with Kalshi's federal preemption argument, which has already split the appellate courts.

What is Kalshi's defense?

Kalshi, regulated by the Commodity Futures Trading Commission, has argued in other litigation that its event contracts fall under exclusive federal jurisdiction and are not subject to state gambling laws. That position has met mixed results. The CFTC has sued at least 10 states to defend what it calls its exclusive authority, and President Donald Trump has backed the agency, calling state officials who challenged the platforms "scum."

The operational stakes for Kalshi are cumulative: each new state action raises the cost of a national platform, either through fines, geofencing or compliance regimes. But no court has yet delivered a final answer.

Where do the state fights stand?

Arkansas joins a roster of more than a dozen states challenging prediction markets:

• Utah filed felony charges against Kalshi and 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 — roughly $10,000 for every household in the state. The CFTC invoked emergency powers to keep Kalshi operating.
• Michigan saw a state judge bar Kalshi's sports contracts in September, with a $500,000 daily fine for failing to block residents.
• Kentucky sued Kalshi, Polymarket and brokerages Coinbase, Robinhood and Webull in June.
• Minnesota's first-in-the-nation felony law was blocked by a federal judge in July as likely preempted by federal law, after Kalshi sued in May.
• Illinois faces a Kalshi suit filed in June over a law requiring sports betting licenses and state taxes.

Arizona filed criminal charges in March, a Washington court temporarily blocked sports contracts in July, and Massachusetts' case sits before the state's highest court after a January injunction.

Is the Supreme Court the finish line?

The federal circuits are split. The Third Circuit ruled in April that New Jersey cannot regulate Kalshi's sports contracts; the Sixth and Ninth Circuits sided with Ohio, Tennessee and Nevada. New Jersey has petitioned the Supreme Court, backed by 39 other states, the District of Columbia and the NFL. Kalshi's response to the petition is due November 9, and the Court is not expected to decide whether to hear the case until December at the earliest, according to ESPN. Until then, expect more state lawsuits — and no resolution.