TLDR
- The DOJ and CFTC reportedly sued Arkansas on November 12 to challenge state enforcement against Kalshi.
- Federal authorities argue that the Commodity Exchange Act gives the CFTC exclusive derivatives-market jurisdiction.
- Arkansas Attorney General Tim Griffin accused Kalshi of providing illegal gambling services without state licensing.
- The federal lawsuit reportedly seeks protection for other CFTC-regulated exchanges and their partners.
- The CFTC issued new guidance on domestic geographic trading restrictions on November 5.
The Justice Department and Commodity Futures Trading Commission (CFTC) sued Arkansas on November 12. Their federal complaint challenges the state’s enforcement action against prediction market operator Kalshi. The government seeks court protection that reportedly reaches other federally regulated exchanges and their business partners.
The lawsuit names Arkansas and Attorney General Tim Griffin, acting in his official capacity. It was filed in the US District Court for the Eastern District of Arkansas. Kalshi itself is not a defendant in the new federal proceeding.
Federal Regulators Challenge State Enforcement
Federal attorneys say the Commodity Exchange Act gives the CFTC exclusive authority over regulated derivatives. They contend that Arkansas cannot apply gambling restrictions to event contracts governed by federal commodities law.
The complaint reportedly asks judges to declare the relevant state restrictions preempted by federal law. It also seeks preliminary and permanent injunctions against enforcement involving CFTC-regulated exchanges. Those requested protections reportedly extend to affiliates and partners rather than Kalshi alone. However, the filing establishes the government’s legal position, not a judicial finding.
The CFTC advanced similar jurisdictional claims in earlier lawsuits against states, including Utah. Those proceedings concern disputes over the regulation of sports-related prediction contracts. Federal policy also includes proposed rules defining event contracts as swaps.
Arkansas Seeks Penalties and Consumer Remedies
The dispute follows Griffin’s November 4 lawsuit against KalshiEX LLC and Kalshi Inc. Arkansas filed that case in Independence County Circuit Court. The state alleges that Kalshi offers unlawful gambling without complying with Arkansas licensing requirements. It also accuses the companies of violating the Arkansas Deceptive Trade Practices Act.
Griffin said Arkansas law focuses on the substance of wagering activities, rather than their labels. The state’s complaint seeks restitution, monetary penalties, unpaid taxes, and restrictions on the challenged conduct. These accusations remain contested allegations. The requests for relief do not establish that Kalshi violated Arkansas law.
On November 5, the CFTC published an interpretation of its impartial-access requirements for designated contract markets. The agency said exchanges generally cannot restrict otherwise eligible US traders based solely on domestic location. The CFTC gave exchanges 30 days to end noncompliant geographic blocks or explain compliance barriers. It also instructed them to examine restrictions imposed by intermediaries.
