The U.S. Department of Justice and the Commodity Futures Trading Commission sued Arkansas in federal court over the state’s efforts to stop prediction-market operator Kalshi from offering event contracts to customers in Arkansas.
The complaint was filed Nov. 12 in the U.S. District Court for the Eastern District of Arkansas. It names Arkansas and Attorney General Tim Griffin as defendants and asks the court to prevent the state from enforcing its gambling and consumer protection laws against contracts traded on exchanges regulated by the CFTC.
Federal jurisdiction at issue
The federal agencies argue that the Commodity Exchange Act gives the CFTC exclusive authority over derivatives traded on designated contract markets. The complaint says the event contracts involved in the Arkansas dispute fall within that federal regulatory framework.
The requested orders would apply not only to Kalshi but also to other CFTC-registered exchanges, along with their affiliates and business partners. The Justice Department and the CFTC are seeking both preliminary and permanent injunctions barring Arkansas from using its gambling and consumer protection statutes against the transactions.
- The lawsuit was filed in the Eastern District of Arkansas on Nov. 12.
- The federal agencies contend that the Commodity Exchange Act controls the contracts at issue.
- The requested injunctions would cover Kalshi and other CFTC-registered exchanges.
Arkansas enforcement actions
Griffin sued Kalshi and online gaming company Virtual Gaming Worlds on Nov. 4. The state’s complaints allege that the companies offered illegal gambling in Arkansas and misled consumers about whether their products were lawful.
Griffin is seeking restitution for customers, civil penalties and unpaid taxes. He also asked state courts to issue orders preventing both companies from commercializing their products in Arkansas.
The federal lawsuit challenges the state’s ability to pursue those enforcement actions when the products are event contracts offered through exchanges subject to federal oversight. The agencies’ filing places the dispute before the federal court while Arkansas’ claims against Kalshi and Virtual Gaming Worlds remain part of the state’s enforcement effort.
The case concerns the division of authority between Arkansas and the federal government over prediction-market contracts. The Justice Department and the CFTC are asking the court to determine whether state gambling and consumer protection laws may be applied to those federally regulated transactions.
