Arkansas Attorney General Tim Griffin has filed a lawsuit against prediction market operator Kalshi, accusing the company of offering illegal gambling services to state residents without the licenses and oversight required under Arkansas law.
Summary
- Arkansas Attorney General Tim Griffin sued KalshiEX LLC and Kalshi Inc. on November 4, accusing the prediction market of operating an illegal gambling platform.
- The lawsuit alleges Kalshi allowed Arkansas residents as young as 18 to wager on sporting events, elections and entertainment without required state gambling licenses.
- Arkansas seeks consumer restitution, civil penalties, unpaid taxes and court orders restricting the company’s alleged unlawful activities.
- Kalshi maintains that its event contracts fall under federal derivatives regulation, while state officials argue that sports-related contracts remain subject to gambling laws.
- The case follows criminal charges against Kalshi in Utah and a separate CFTC lawsuit challenging state enforcement over federally regulated prediction markets.
Griffin’s November 4 announcement identified KalshiEX LLC and Kalshi Inc. as defendants, alleging multiple violations of the Arkansas Deceptive Trade Practices Act. The lawsuit challenges the company’s handling of wagers on sports, elections and entertainment events, while seeking financial penalties, restitution and restrictions on its operations.
The case was filed in the Circuit Court of Independence County, Arkansas, under case number 32CV-26-717. It is part of an ongoing dispute over whether federally regulated prediction markets must comply with individual states’ gambling laws.
Arkansas accuses Kalshi of operating without gambling licenses
The state’s complaint argues that Kalshi allows users to place money on the outcomes of events that Arkansas considers gambling, regardless of how the company describes its products.
“Arkansas law is concerned with substance, not semantics,” Griffin said.
His office alleges that Kalshi made its platform available to Arkansas residents without obtaining gambling licenses, complying with state restrictions or paying the taxes required of authorized operators.
The lawsuit specifically challenges access for users aged 18 to 20. Arkansas generally requires individuals to be at least 21 to participate in regulated casino gambling and sports betting, while Kalshi permits eligible users to open accounts at 18.
Officials argue that the platform’s contracts involving college football games, professional sports and entertainment outcomes should fall under existing gambling restrictions.
The complaint describes Kalshi as a “pocket-sized bookie” and accuses the company of presenting its products as financial trading while accepting money on uncertain outcomes.
Arkansas has not secured a judgment establishing those allegations. The lawsuit asks the court to determine whether the company’s activities violate state consumer protection laws.
Kalshi faces restitution claims and allegations of consumer harm
Beyond licensing, Griffin’s office claims Kalshi failed to adequately address the financial and personal risks associated with its products.
The attorney general pointed to the platform’s self-exclusion tools, deposit limits and trading breaks as features commonly used by gambling operators.
He cited Kalshi’s partnership with the National Council on Problem Gambling and its promotion of addiction resources.
His office argues that those measures show the company recognizes the possibility of excessive wagering and financial losses, while continuing to dispute its classification as a gambling business.
The complaint links those concerns to alleged consumer harms, including substantial losses and mental health difficulties. These are allegations presented by the state, not findings that Kalshi caused particular injuries.
Arkansas is seeking restitution for affected consumers, civil penalties, unpaid taxes and an injunction against conduct found to violate state law.
The complaint separately includes an unjust enrichment claim, arguing that Kalshi should not retain transaction fees and other revenue allegedly obtained through unlawful wagering.
Utah criminal charges deepen Kalshi’s legal troubles
Arkansas filed its complaint days after Utah brought 14 criminal charges against Kalshi and its co-founders, Tarek Mansour and Luana Lopes Lara.
The October 28 prosecution followed an undercover investigation in which a state agent allegedly placed 12 sports wagers totaling $114.87.
Utah prosecutors filed 13 felony counts and one misdemeanor, accusing the defendants of promoting gambling through the platform.
The criminal action followed a separate Utah civil lawsuit filed on October 20, seeking up to $61.2 million in allegedly unlawful trading fees.
Kalshi rejected Utah’s criminal allegations and has maintained that its event contracts are financial derivatives governed by federal commodities law.
The company has pursued legal challenges against state enforcement in several jurisdictions.
A federal appeals court previously ruled against Kalshi in Nevada, finding that the company had not established sufficient grounds to prevent regulators from applying state gaming laws to its sports contracts.
CFTC challenges state authority over prediction markets
The Commodity Futures Trading Commission has taken a different position from Arkansas and several other states.
On October 27, the federal regulator sued Utah to block enforcement measures targeting CFTC-registered prediction markets.
The agency argues that Congress gave it exclusive authority over commodity derivatives, including qualifying event contracts traded through registered exchanges.
“CFTC has the expertise and responsibility to defend its exclusive jurisdiction,” Chairman Michael Selig said.
The agency said it had initiated legal proceedings against nine other states and submitted arguments in several federal appellate courts.
