Arkansas Sues Kalshi in Third State Crackdown in a Week as CEO Touts Midterm Forecast Accuracy
Key Takeaways
- •Arkansas Attorney General Tim Griffin filed a lawsuit against KalshiEX LLC and Kalshi Inc., alleging the platform provides illegal gambling in violation of Arkansas's Deceptive Trade Practices Act.
- •The state is seeking restitution, penalties, taxes, and injunctive relief, arguing Kalshi avoids the licensing and tax obligations required of legal operators while offering real-money markets to Arkansans as young as 18.
- •The complaint was filed a day after the US midterm elections, during which Americans wagered more than $1.3 billion through Kalshi and its odds correctly called the winners in 98% of the races it listed.
- •Kalshi now faces litigation in roughly 20 states, including Utah's case charging the company and its co-founders with 13 felony counts and a misdemeanor, and consistently argues its event contracts are federally regulated derivatives outside state gambling law.
- •Federal appeals courts are split on the dispute, with the Third Circuit siding with Kalshi and the Sixth and Ninth Circuits backing the states, prompting New Jersey to ask the Supreme Court in September to resolve the conflict.
Kalshi, the world's largest prediction market by volume, has been sued again, adding to a fast-widening wave of state-level legal action against the platform.
Arkansas Attorney General Tim Griffin alleged on Wednesday that the platform is offering illegal gambling to state residents in violation of the state's Deceptive Trade Practices Act, Arkansas's consumer-protection statute. The timing was pointed: the complaint landed just as Kalshi's chief executive, Tarek Mansour, was publicizing the platform's success rate in forecasting the winners of the United States midterm elections.
Arkansas AG goes after Kalshi
Griffin filed the complaint against KalshiEX LLC and Kalshi Inc. in Independence County, as reported by KARK. He told reporters that the state is seeking “restitution, penalties, taxes, and injunctive relief” from a platform he described as a “pocket-sized bookie.”
The platform tripped Griffin's alarms because it avoids the licenses and taxes required of legal operators in the state while offering markets to Arkansans “as young as 18 years old” who place real-money stakes on sports and entertainment outcomes.
Griffin also pointed to the platform's deposit limits, gambling-addiction resources, and other self-exclusion tools as proof of the gap between what the company is and what it claims to be. In his words, Kalshi's “actions speak louder than its labels.” In a statement referencing the University of Arkansas's Razorbacks, he added that no one has to be “a genius to understand that wagering money on whether the Razorbacks win or lose is gambling.”
Kalshi has been on the Arkansas attorney general's radar since at least October 2025, when Griffin's office concluded that Kalshi, or any platform running a similar business model, would be violating Arkansas law without the required gaming license. That opinion, requested by state Senator Bryan King, found that no platform is exempt from scrutiny simply because it labels its wagers as “prediction market” contracts.
Mansour's midterm victory lap
The lawsuit arrived the day after the US midterm elections, just as Mansour took a victory lap over the platform's forecasting record: Kalshi's odds correctly called the winners in 98% of the races it listed. The performance drew reaction across X, including a post from Charles Fain Lehman. Mansour has also discussed Kalshi's election role in a Columbia Journalism Review interview.
Mansour wrote on X that “The power to decide what America sees changed hands,” taking aim at establishment skeptics who had doubted the accuracy of prediction markets.
Americans wagered more than $1.3 billion on the midterms through Kalshi. On Tuesday, the platform served as a live election hub pulling data from the Associated Press, and its forecast of a Democratic sweep held up. Kalshi recently raised about $1 billion at a $40 billion valuation, even though roughly 80% of its trading comes from sports — the exact category states are suing over.
Kalshi faces lawsuits in 20 states
Before Arkansas moved, Kalshi was already engaged in court battles across state lines, including in Utah, Arizona, Nevada, and Ohio. Utah pursued the platform and its co-founders, Tarek Mansour and Luana Lopes Lara, on 13 felony counts and a misdemeanor on October 28, as reported by Cryptopolitan.
Kalshi's answer is the same everywhere: its event contracts are federally regulated derivatives that sit outside state gambling law. The courts disagree with one another — the Third Circuit has sided with Kalshi, while the Sixth and Ninth Circuits have backed the states — and New Jersey asked the Supreme Court in September to resolve the split. Until the nation's highest court weighs in, the same event contracts can be treated differently depending on which appeals court covers a given state.
The Commodity Futures Trading Commission (CFTC), the federal regulator of US futures and swaps markets, has sued states to keep the markets under federal rules. Litigation now touches roughly 20 states. The markers to watch from here are whether the Supreme Court agrees to hear New Jersey's petition and how the newest suits, including Arkansas's, unfold. Separately, the Phantom wallet has recently added Kalshi prediction markets for US users as the rules diverge.
