The Justice Department and Commodity Futures Trading Commission sued Arkansas on Nov. 12, asking a federal judge to halt the state's gambling-law case against Kalshi and block similar enforcement against other federally regulated market participants.
The complaint, filed in the U.S. District Court for the Eastern District of Arkansas, names the state and Attorney General Tim Griffin, in his official capacity, as defendants. The named plaintiffs are the United States and the CFTC.
They seek a declaration that federal law displaces Arkansas law as applied to transactions on CFTC-regulated exchanges, plus preliminary and permanent injunctions. The requested protection extends to CFTC-regulated entities and their affiliates and partners, covering both investigations and enforcement tied to transactions listed, offered or executed on those markets—not just Arkansas's pending Kalshi case.
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Arkansas sued Kalshi on Nov. 4 in Independence County Circuit Court. Griffin alleged that the prediction-market operator was providing illegal gambling and said he sought restitution, penalties, taxes and injunctive relief under the Arkansas Deceptive Trade Practices Act.
“Arkansas law is concerned with substance, not semantics,” Griffin said when announcing that suit, arguing that wagers on sporting outcomes remain gambling regardless of the platform's labels.
A Fight Over Who Regulates Event Contracts
The federal plaintiffs argue that the event contracts targeted by Arkansas—contracts with payouts tied to outcomes—are “swaps” under the Commodity Exchange Act. They say the act gives the CFTC “exclusive jurisdiction” over those transactions on designated exchanges, displacing state authority both expressly and through a comprehensive federal regulatory framework.
The complaint also alleges a direct conflict: forcing exchanges to deny access to Arkansas residents would clash with federal impartial-access requirements. It argues that state enforcement would undermine the process allowing exchanges to list contracts after certifying to the CFTC that they comply with federal law.
Federal Intervention Widens Despite Court Setbacks
The CFTC previously announced suits challenging state restrictions in Arizona in April and Utah in October. The Arkansas filing adds another state to that campaign rather than leaving Kalshi alone to contest enforcement.
Federal backing has not guaranteed Kalshi interim court protection. As The Defiant previously reported, the Tenth Circuit denied its request for an injunction pending appeal in Utah on Sept. 8. The Second Circuit denied similar protection in its New York and Connecticut appeals on Nov. 3. Those denials did not resolve the underlying appeals.
A separate New York ruling challenged the CFTC's central legal premise. In a Nov. 10 opinion, U.S. District Judge Colleen McMahon denied sports prediction exchange Novig's request for a preliminary injunction. At that stage, she concluded its sports contracts were not swaps under the Commodity Exchange Act, leaving New York able to apply its gambling laws by requiring a state license or prohibiting the contracts' listing and trading.
