The US Department of Justice and the Commodity Futures Trading Commission (CFTC) filed a lawsuit against the State of Arkansas on November 12, 2026, asking a federal court to halt the state's enforcement action against prediction market operator Kalshi and to bar investigations tied to trades on CFTC-regulated exchanges. The case sets up a direct legal test of whether state gambling laws can apply to trading on federally regulated prediction markets, and the answer will help determine whether these platforms operate under federal commodities oversight alone or remain exposed to state gambling enforcement.

The filing came eight days after Arkansas sued Kalshi in state court. Prediction markets let users trade contracts whose payouts depend on real-world outcomes. Although the dispute began with Kalshi, the federal request reaches further: the government is seeking protection for all CFTC-regulated exchanges, along with their affiliates and their business partners. If granted, the relief would shield the broader class of federally regulated prediction market platforms from state gambling enforcement.

The complaint names the State of Arkansas and Attorney General Tim Griffin, in his official capacity, as defendants. It was filed in the US District Court for the Eastern District of Arkansas. Kalshi is not a party to the federal case. The government brought the lawsuit on its own behalf, separate from the state court fight.

The Defiant reported the filing on X:

DOJ AND @CFTC SUE ARKANSAS TO BLOCK ENFORCEMENT BEYOND @Kalshi They seek to halt the state's gambling case and bar probes tied to trades on CFTC-regulated exchanges. The requested protection includes affiliates and partners. Read more here:

— The Defiant (@DefiantNews) November 13, 2026

What the Federal Government Wants

Federal attorneys argue that the Commodity Exchange Act gives the CFTC exclusive authority over regulated derivatives markets. Under that interpretation, event contracts traded on CFTC-supervised venues fall under federal commodities law rather than state gambling statutes, leaving states no power to apply their gambling rules to those trades.

The complaint asks the court to declare the Arkansas restrictions preempted by federal law, the doctrine under which valid federal rules override conflicting state ones. It also seeks preliminary and permanent injunctions blocking enforcement against CFTC-regulated exchanges. The filing sets out the government's legal position, and a judge has not yet ruled on any of the claims. A ruling on the preliminary injunction would determine whether Arkansas's enforcement is paused while the litigation proceeds.

This is not the first time the CFTC has made this argument in court. The agency brought similar claims in earlier lawsuits against states, including Utah, in disputes over sports-related prediction contracts. The CFTC has also proposed rules that would define event contracts as swaps, a category that falls under the agency's federal oversight.

The Arkansas Case Against Kalshi

The federal suit follows a case Griffin filed on November 4 against KalshiEX LLC and Kalshi Inc. Arkansas brought that lawsuit in Independence County Circuit Court. The state alleges that Kalshi offers illegal gambling without meeting Arkansas licensing requirements, and claims the companies broke the Arkansas Deceptive Trade Practices Act.

Griffin has said Arkansas law looks at what an activity actually is, not what it is called. His position is that calling a wager a contract does not change how state law treats it.

Arkansas is seeking restitution, money penalties, unpaid taxes and limits on Kalshi's conduct. These remain allegations, and no court has found that Kalshi broke state law.

CFTC Guidance on Location-Based Restrictions

On November 5, one day after Arkansas sued Kalshi and one week before the federal government filed its own complaint, the CFTC published guidance on impartial access rules for designated contract markets. The guidance addresses whether exchanges can block traders based on where they live in the United States.

According to the agency, exchanges generally cannot restrict otherwise eligible US traders based only on their domestic location. It also told exchanges to review similar limits imposed by intermediaries. In the context of the state-by-state enforcement fight, that means exchanges generally cannot respond to actions like Arkansas's by simply blocking residents of the state involved.

Exchanges have 30 days from the November 5 notice to end geographic blocks that do not comply, a window that closes on December 5, 2026. Those that cannot comply must explain the barriers to the CFTC.