The U.S. Department of Justice and Commodity Futures Trading Commission have filed a federal lawsuit against Arkansas seeking to prevent the state from enforcing restrictions against Kalshi's prediction markets and imposing penalties that federal authorities warn could reach hundreds of millions of dollars.
The complaint, filed in U.S. District Court for the Eastern District of Arkansas, names the state and Attorney General Tim Griffin as defendants. It argues that federal commodities law grants the CFTC exclusive jurisdiction over event contracts traded on CFTC-registered exchanges, overriding state regulations.
Arkansas launched its own enforcement action on November 4, accusing Kalshi of operating an unlawful gambling business and engaging in deceptive practices. The state alleges that Kalshi's sports contracts are effectively unlicensed wagers and permitted participation by customers aged 18 to 20, below Arkansas's minimum casino gambling age of 21. Arkansas is seeking restitution, unpaid taxes, and penalties of up to $10,000 per violation.
CFTC Chairman Michael S. Selig defended the federal position in a statement, saying the agency "will continue to defend its sole jurisdiction over these federally regulated markets as granted by Congress under the Commodity Exchange Act."
Nationwide Legal Battle Expands
The Arkansas dispute is part of a broader jurisdictional conflict. The CFTC and DOJ have previously sued Arizona, Connecticut, Illinois, Kentucky, Minnesota, New Mexico, New York, Rhode Island, Wisconsin, and Utah. Federal courts have granted preliminary protections against state enforcement efforts in Arizona, Illinois, and Minnesota, while other rulings have favored state regulators.
In April, a coalition of state attorneys general challenged the CFTC's classification of sports-related prediction contracts as federally regulated derivatives, arguing that the agency's approach undermines longstanding state protections addressing gambling addiction, underage participation, and sports integrity.
The federal government's latest complaint also references a November 5 CFTC interpretation of its impartial-access requirements, which directs federally regulated exchanges to eliminate certain geographic restrictions or explain why compliance is infeasible. Federal authorities argue that Arkansas's enforcement efforts would force Kalshi to restrict residents' access, contradicting these requirements.
The CFTC has also filed supporting briefs in four federal appeals courts and one state supreme court as the nationwide legal fight continues.
