Arkansas Attorney General Tim Griffin filed a lawsuit against prediction market operator Kalshi on November 4, alleging that the platform offers illegal gambling to residents, according to an announcement from the Attorney General's office. The suit names KalshiEX LLC and Kalshi Inc. as defendants and accuses the companies of offering sports and entertainment wagers without complying with Arkansas gambling laws. The case was filed in Independence County under the state's consumer protection law.

The filing places Arkansas at the center of a question now being contested across the country: whether event contracts traded on federally registered prediction markets fall under federal derivatives oversight or under state gambling law.

Kalshi and Arkansas Clash Over Sports Wagers

Griffin argues that Kalshi lets customers risk money on sports, elections and entertainment without meeting state gambling requirements. The complaint points to contracts tied to University of Arkansas Razorbacks games as an example of betting that state law controls. The state further alleges that Kalshi allows users aged 18 and older to trade these contracts.

According to the attorney general, the platform exposes customers to financial losses and problem gambling. Those claims remain allegations before the court.

Kalshi Cites Federal Trading Rules

Kalshi maintains that its event contracts are financial products overseen by the Commodity Futures Trading Commission (CFTC), and its federal registration is central to its defense against state gambling claims. That classification is the crux of the dispute: the company positions its products as derivatives under federal rules, while state regulators treat sports-linked contracts as gambling under their laws. The regulator recently cleared stock-linked perpetual futures for trading on regulated exchanges.

Arkansas rejects the argument that federal oversight exempts Kalshi from state rules. Griffin is seeking restitution for customers, civil penalties, unpaid taxes and a court order halting the conduct alleged to violate the law.

Utah Brings Criminal Case Against Kalshi

Arkansas's filing adds the state to a growing list of jurisdictions challenging Kalshi's business model. On October 28, Utah prosecutors filed 14 criminal charges against the company, chief executive Tarek Mansour and chief operating officer Luana Lopes Lara. Prosecutors allege that an undercover investigator placed sports trades through the platform. The criminal case followed an earlier civil lawsuit seeking to stop the company from offering event contracts. Kalshi has rejected Utah's allegations.

CFTC Disputes State Authority

The CFTC has challenged state efforts to regulate federally registered prediction exchanges. On October 27, it announced a lawsuit against Utah and said it had taken legal action against nine other states. CFTC Chair Michael Selig said Congress gave the agency primary authority over these markets. The federal lawsuit against Utah seeks to block state enforcement involving federally regulated exchanges.

The legal dispute remains unresolved across jurisdictions, and other state lawsuits against Kalshi also remain pending. Upcoming rulings in these cases will test whether federal registration shields event contracts from state gambling enforcement, a question that will determine which regulatory framework governs event contracts for residents.

In a separate action filed the same day, Griffin sued online gaming operator VGW. Arkansas alleges that the company's casino-style sites allow customers to redeem virtual gaming coins for cash, in violation of state gambling laws.