The Justice Department and the Commodity Futures Trading Commission have sued Arkansas to stop Attorney General Tim Griffin’s case against Kalshi, arguing that federal law leaves states no room to treat CFTC-regulated event contracts as illegal gambling. The complaint, filed on Thursday in federal court in Little Rock, makes Arkansas at least the 11th state the CFTC has taken to court over prediction markets, and it lands on the same day a Louisiana judge ordered Kalshi and others out of that state.
What the DOJ and CFTC are asking for
The 34-page complaint, United States and CFTC v. State of Arkansas, No. 4:26-cv-01255, was filed in the Eastern District of Arkansas on Nov. 12. It names the state and Griffin in his official capacity.
The agencies argue that the Commodity Exchange Act gives the CFTC “exclusive jurisdiction” over futures, options and swaps traded on federally regulated exchanges, that the event contracts Arkansas is targeting are swaps, and that Kalshi is a CFTC-regulated designated contract market. They say the state’s efforts “intrude on the exclusive federal scheme Congress designed to oversee United States commodity derivatives markets.”
The relief sought is broad. The agencies want a declaration that Arkansas law is preempted as applied to transactions on CFTC-regulated exchanges, and a preliminary and permanent injunction barring the state and its agents “from investigating CFTC-regulated entities and their affiliates and partners” for violations of Arkansas law tied to those trades. That would reach beyond Kalshi to any regulated exchange and its partners. No separate motion for a preliminary injunction had been filed with the complaint, according to a review of the docket by AskSpinner.
The Arkansas case against Kalshi
Griffin sued Kalshi Inc. and KalshiEX LLC on Nov. 4 in the circuit court of Independence County under the Arkansas Deceptive Trade Practices Act, seeking restitution, penalties, taxes and an injunction. “It doesn’t take a genius to understand that wagering money on whether the Razorbacks win or lose is gambling,” Griffin said when he filed it.
The state’s complaint alleges that thousands of Arkansas residents, including people aged 18 to 20, have traded on Kalshi, and that the company has never paid sales or use taxes in the state. The federal filing focuses on the money at stake. Arkansas law allows civil penalties of up to $10,000 per violation, while Kalshi earns between $0.07 and $2.63 in fees per 100 contracts on most markets. If penalties were counted per violation, the agencies wrote, they “would dwarf Kalshi’s income from its activities in Arkansas and could reach the hundreds of millions of dollars.”
Kalshi is not the only company fighting Griffin. Crypto.com’s OG.com and Polymarket US filed their own federal suits against him on Nov. 9, according to AskSpinner.
Eleven states and counting
The complaint lists ten earlier preemption fights the CFTC has joined or brought: Arizona, Connecticut, Illinois, Kentucky, Minnesota, New Mexico, New York, Rhode Island, Wisconsin and Utah, the most recent of those filed on Oct. 26. Federal judges have granted preliminary injunctions in the government’s favor in Arizona, Illinois and Minnesota, according to the filing. The Wisconsin case is on appeal at the Seventh Circuit.
Arkansas sits in the Eighth Circuit, which also covers Minnesota, where the government already holds a preliminary injunction. As The Block reported, the new suit is aimed at future state actions against CFTC-regulated prediction markets as well as the existing Kalshi case.
What it means for Louisiana
Louisiana is not on the government’s list yet. On Thursday a Tangipahoa Parish judge signed a temporary restraining order barring Kalshi, Polymarket, Coinbase, Robinhood, Gemini and others from offering event contracts in the state and ordering them to geofence it. A preliminary injunction hearing is set for Nov. 30. Kalshi has asked a federal court in the Western District of Louisiana for its own injunction against Attorney General Liz Murrill, and no ruling had been reported as of Friday.
The Arkansas filing shows the federal playbook: sue the state in federal court, argue preemption and ask for an order that covers every regulated exchange. Whether the DOJ and CFTC do the same in Louisiana, and how quickly, is the next thing to watch. The agency is not handing Kalshi a free pass, though. Kalshi confirmed a CFTC warning over its contract filings earlier this week and called it a procedural error.
FAQ
Why did the DOJ and CFTC sue Arkansas?
They argue that the Commodity Exchange Act gives the CFTC exclusive jurisdiction over event contracts on regulated exchanges, so Arkansas cannot enforce its gambling and consumer protection laws against Kalshi for those trades.
What did Arkansas accuse Kalshi of?
Griffin’s Nov. 4 suit says Kalshi runs illegal gambling, including sports betting, in Arkansas, misled consumers about the legality of its products and never paid sales or use taxes. Kalshi says its contracts are federally regulated financial products.
Has a court ruled in the Arkansas case?
Not yet. The complaint was filed on Nov. 12, and no ruling on an injunction had been reported as of Friday.
Disclaimer: This article is for informational purposes only and does not constitute financial advice.
