On Wednesday, the Attorney General of Arkansas, Tim Griffin, stated that the state has filed charges against Kalshi, accusing this forecasting company of providing illegal and unregulated gambling platforms to residents within the state.
The lawsuit against KalshiEX LLC and Kalshi Inc alleges that Kalshi has repeatedly violated the Arkansas Deceptive Trade Practices Act ( Arkansas Deceptive Trade Practices Act ). The state is seeking restitution, fines, tax payments, and injunctive relief.
Griffin wrote on social media:
Today, I filed a lawsuit against @Kalshi, accusing them of violating the Arkansas Deceptive Trade Practices Act by operating an unregulated gambling platform.
He also stated: “Kalshi has established a global business it calls a predictive market, which allows consumers to bet money on almost any outcome.”
Griffin said, "It's not necessary to be a genius to understand that betting money, whether you win or lose, is gambling. And gambling on unregulated platforms is explicitly prohibited by the laws of Arkansas."
Griffin claims that Kalshi did not obtain the necessary licenses from gambling operators nor pay the relevant taxes, yet it opened its platform to an 18-year-old resident of Arkansas and encouraged them to bet on sports and entertainment events. He said, 'Arkansas law focuses on the substance, not the wording.'
Griffin also mentioned Kalshi's own responsible gambling tools, including self-exclusion, deposit limits, and transaction suspensions, as well as its cooperation with the National Problem Gambling Commission ( National Council on Problem Gambling ). It is believed that these measures indicate that the company is aware of the gambling-related risks associated with its platform.
"Although Kalshi insists that its product is not gambling, its behavior speaks louder than its label," he said.
Regulated by the U.S. Commodity Futures Trading Commission (CFTC), it has also argued in other cases that its event contracts fall under the exclusive jurisdiction of the federal government and are not subject to state gambling laws.
The Progress of the Battle Between States and Predictive Markets
Arkansas is one of more than a dozen states that have taken action against the prediction market. Some of the more significant cases include:
- Utah: Last week, the state filed felony charges against Kalshi and its co-founders Tarek Mansour and Luana Lopes Lara for illegally promoting gambling. Kalshi called these charges "crazy overreach."
- New York State: In July of this year, the Attorney General Letitia James filed a lawsuit against Kalshi seeking at least $36 billion in compensation. Subsequently, CFTC exercised emergency powers to ensure that Kalshi could continue to operate.
- Michigan: A state judge prohibited Kalshi from providing sports betting contracts in September, and if they fail to prevent Michigan residents from participating, they may face a fine of $500,000 per day.
- Kentucky: In June, the state filed a lawsuit against Kalshi, Polymarket, and their brokerage partners Coinbase, Robinhood, and Webull.
- Minnesota: Kalshi filed a lawsuit in May in an attempt to prevent the implementation of a law pioneered by that state, which defines operating or promoting predictive markets as a felony. In July, a federal judge prevented the ban from taking effect, ruling that it was likely to be overridden by federal laws.
- Illinois: Kalshi filed a lawsuit against the state in June, opposing a new law that requires predicting market outcomes to obtain a sports betting license and pay state taxes.
Other states have also taken action against the predictive market. In March, Arizona filed criminal charges against Kalshi; in July, a court in Washington state temporarily halted its sports contracts; the case in Massachusetts has now reached the state's Supreme Court after a lower court prohibited Kalshi's sports contracts in January.
CFTC has filed lawsuits in at least 10 states to defend what it claims is its exclusive jurisdiction over the predictive market. U.S. President Donald Trump also supports this institution, referring to several state officials who challenge these platforms as “scum”.
There is currently disagreement regarding the rulings of the federal appellate courts. In April, the Third Circuit Court ruled that New Jersey could not regulate the sports contracts of Kalshi; whereas the Sixth and Ninth Circuit Courts supported Ohio, Tennessee, and Nevada. New Jersey has requested the Supreme Court to resolve this issue and has received support from another 39 states, Washington D.C., as well as NFL. According to ESPN, the deadline for Kalshi to respond to this petition is November 9th, and it is not until December at the earliest that the Supreme Court may decide whether to accept the case.
