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Arkansas sues Kalshi, calling the prediction market an illegal gambling platform
Summary
Arkansas Attorney General Tim Griffin sued Kalshi on Wednesday, alleging the CFTC-regulated prediction market operates an illegal, unregulated gambling platform for state residents, The Block, Decrypt and CoinDesk reported.
Griffin said wagering on outcomes such as whether the Razorbacks win or lose is gambling "squarely prohibited" by Arkansas law, and Decrypt said the complaint against KalshiEX LLC and Kalshi Inc. seeks restitution, penalties, taxes and an injunction under the Arkansas Deceptive Trade Practices Act.
The suit alleges Kalshi let users as young as 18 bet on sports and entertainment without state gambling licenses or taxes; CoinDesk said the complaint calls Kalshi a "pocket-sized bookie."
Kalshi has argued in other cases that its event contracts are federally regulated derivatives outside state gambling laws; Arkansas joins a growing list of state actions as the CFTC sues states to defend its claimed exclusive jurisdiction, the outlets reported.
On Nov. 12 the DOJ and CFTC sued Arkansas in federal court to block the case, arguing federal law preempts state gambling law for CFTC-regulated prediction markets, The Block reported.
Updates
- Update, : Added The Block: the DOJ and CFTC sued Arkansas to block its enforcement action against Kalshi.
Key facts
- "It doesn't take a genius to understand that wagering money on whether the Razorbacks win or lose is gambling," Griffin said.
- "Although Kalshi insists that its products are not gambling, its actions speak louder than its labels," Griffin said, citing risks including excessive wagering, financial losses and mental health harms.
- Decrypt said Griffin pointed to Kalshi's self-exclusion tools, deposit limits, trading breaks and partnership with the National Council on Problem Gambling as evidence the company knows its platform carries gambling-style risks.
- The Block said Utah last week filed criminal charges against Kalshi, CEO Tarek Mansour and COO Luana Lopes Lara after an earlier civil suit, and that the CFTC has sued at least 10 states over prediction-market jurisdiction.
- Decrypt listed significant parallel fights in New York, Michigan, Kentucky, Minnesota and Illinois, among others, and said New Jersey has asked the Supreme Court to settle the preemption question, with Kalshi's response due November 9.
- On Nov. 12 the DOJ and CFTC sued Arkansas Attorney General Tim Griffin in the U.S. District Court for the Eastern District of Arkansas, arguing the Commodity Exchange Act gives the CFTC exclusive jurisdiction over the event contracts, which they call swaps, and seeking preliminary and permanent injunctions against the state's case and future actions against CFTC-regulated prediction markets.