Kalshi Faces Arkansas Lawsuit over Prediction Markets and State Gambling Laws

LITTLE ROCK, Arkansas – Attorney General Tim Griffin filed a lawsuit against prediction market operator Kalshi on November 4, accusing it of providing illegal gambling services to Arkansas residents. The civil action seeks financial penalties, consumer restitution and restrictions on the company’s operations under state law.

The lawsuit names KalshiEX LLC and Kalshi Inc., alleging that the companies allow Arkansas residents to wager money on sports, elections and entertainment events without complying with state gambling requirements. Griffin argues that Kalshi’s federal regulatory status does not exempt it from Arkansas gambling laws.

Arkansas Accuses Kalshi of Operating Without Gambling Licenses

Griffin filed the complaint in Independence County Circuit Court, alleging multiple violations of the Arkansas Deceptive Trade Practices Act. The state contends that Kalshi offers products resembling traditional gambling while presenting them as financial contracts.

Kalshi allows users to trade contracts linked to real-world outcomes, including sporting events, political developments and popular culture. Griffin maintains that these transactions constitute gambling when Arkansas residents risk money on uncertain outcomes.

In his November 4 announcement, Griffin questioned the distinction between sports betting and prediction market trading, pointing specifically to contracts involving Arkansas Razorbacks games.

The attorney general alleges that Kalshi has avoided the licensing, regulatory oversight and tax obligations imposed on lawful gambling operators in Arkansas. He also highlighted the platform’s minimum participation age of 18, compared with the state’s minimum age of 21 for regulated casino gambling.

Griffin further pointed to Kalshi’s responsible gambling features, including self-exclusion tools, deposit limits and trading breaks. He argued that these safeguards demonstrate the company’s awareness of risks commonly associated with gambling, including financial losses and potentially harmful betting behavior.

Lawsuit Seeks Restitution, Penalties and Restrictions

Arkansas is asking the court to hold Kalshi accountable for alleged violations of its consumer protection laws. The requested remedies include restitution for affected consumers, civil penalties, unpaid taxes and injunctive relief that could restrict the platform’s activities in the state.

The complaint also seeks to establish that Kalshi’s business practices fall within Arkansas gambling restrictions despite the company’s classification of its products as financial instruments.

Griffin maintains that presenting sports and entertainment wagers as event contracts does not change their underlying nature. His office argues that the company has benefited financially from transactions that should be subject to state licensing requirements.

The case is a civil lawsuit rather than a criminal prosecution. Its allegations have not been established in court, and no ruling has determined that Kalshi violated Arkansas law.

On the same day, Griffin filed a separate lawsuit against VGW, the Australian company behind Chumba Casino, LuckyLand Slots and Global Poker. That action alleges that VGW’s sweepstakes-based casino products also violate Arkansas gambling and consumer protection laws.

Kalshi’s Federal Regulatory Status Faces Growing State Challenges

Kalshi maintains that its event contracts are federally regulated financial derivatives rather than conventional gambling products. The company operates as a designated contract market under the supervision of the Commodity Futures Trading Commission (CFTC).

The central legal dispute concerns whether federal commodities regulation prevents individual states from applying their gambling laws to sports and other event contracts offered through federally regulated exchanges.

Arkansas joins several other states challenging Kalshi’s operations. On October 28, Utah prosecutors filed 14 criminal charges against Kalshi and its co-founders, Tarek Mansour and Luana Lopes Lara, following an earlier civil lawsuit.

Utah’s criminal case alleges that the platform unlawfully promoted online sports gambling, while Kalshi disputes the charges and argues that its products fall under federal jurisdiction. Other states, including Nevada, Massachusetts and Arizona, have also pursued legal action or regulatory restrictions involving prediction markets.

The CFTC has taken an opposing position in the broader dispute, maintaining that federal law gives it exclusive jurisdiction over contracts traded on regulated derivatives exchanges. This conflict has led to parallel legal proceedings involving state authorities, Kalshi and federal regulators.

Kalshi had not issued a specific public response to the Arkansas lawsuit in the reports available following its November 4 filing. The company’s previously stated position remains that its event contracts are subject to federal commodities regulation.

The Arkansas case adds another legal challenge to Kalshi’s expanding prediction market business. The court will need to consider whether the company’s event contracts violate state gambling restrictions and whether Arkansas can enforce those restrictions against a federally regulated exchange.

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