DOJ and CFTC Sue Arkansas to Stop Its Case Against Kalshi

The Justice Department and the Commodity Futures Trading Commission sued Arkansas on Thursday, Nov. 12, asking a federal judge to stop the state's Nov. 4 lawsuit against prediction market Kalshi. The 34-page complaint was filed in the U.S. District Court for the Eastern District of Arkansas (No. 4:26-cv-01255).

The case goes beyond one company. The government asks for an injunction barring Arkansas and Attorney General Tim Griffin from investigating CFTC-regulated exchanges "and their affiliates and partners" under state law, according to the complaint. Kalshi is not a party.

Swaps or bets

A prediction market lets people buy contracts that pay out if an event happens, such as a team winning or a bill passing. The fight is over what those contracts are. The federal agencies argue they are swaps under the Commodity Exchange Act, and that the law gives the CFTC "exclusive jurisdiction" over swaps traded on exchanges it designates. Kalshi has held that designation since 2020. If that holds, federal law preempts, or overrides, state gambling rules for those trades.

Arkansas sees it the other way. Griffin's suit, filed in Independence County Circuit Court, alleges Kalshi offers illegal gambling without a state license and violates the Arkansas Deceptive Trade Practices Act. It seeks restitution, penalties, taxes and an injunction.

"Arkansas law is concerned with substance, not semantics," Griffin said in his Nov. 4 statement, adding that wagering on whether the Razorbacks win "is gambling." His statement also acknowledged that Kalshi disputes the gambling label.

No reply yet from Little Rock

We found no public response from Griffin's office to the federal suit by 6 a.m. ET Friday. The Block reported it had asked Kalshi and Griffin's office for comment. None of the claims in either lawsuit has been decided by a court.

Polymarket US and OG.com filed their own federal suits against Griffin on Nov. 9, Spinner reported.

In our opinion: Washington is now a plaintiff in the state-versus-prediction-market fight, on top of the companies suing on their own. The stake is every CFTC-listed event contract sold in Arkansas, plus the brokers and apps that route them. The first thing to watch is whether the government files for a preliminary injunction, which the public docket does not yet show.