The U.S. Department of Justice and Commodity Futures Trading Commission filed a federal lawsuit against Arkansas on Nov. 12, seeking to block the state’s gambling-law enforcement action against prediction market operator Kalshi. The complaint, filed in the U.S. District Court for the Eastern District of Arkansas, names Attorney General Tim Griffin as a defendant and argues federal law preempts state authority over transactions on CFTC-regulated exchanges. The case escalates a multi-state legal battle over whether prediction markets constitute gambling or federally regulated financial instruments.
The complaint asks a federal judge to halt Arkansas’s case against Kalshi and block similar enforcement against other federally regulated market participants. The United States and the CFTC are listed as plaintiffs, with the state and Attorney General Tim Griffin, in his official capacity, named as defendants.
Federal Government Seeks Broad Protections
The DOJ and CFTC seek a declaration that federal law displaces Arkansas law as applied to transactions on CFTC-regulated exchanges. They also request preliminary and permanent injunctions.
The requested protection extends beyond Kalshi’s case. It covers CFTC-regulated entities, their affiliates and partners — encompassing both investigations and enforcement tied to transactions listed, offered or executed on those markets.
Arkansas’s Original Suit Against Kalshi
Arkansas sued Kalshi on Nov. 4 in Independence County Circuit Court. Attorney General Griffin alleged the prediction market operator was providing illegal gambling and 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 the suit. He argued that wagers on sporting outcomes remain gambling regardless of the platform’s labels.
Preemption Argument Centers on the Commodity Exchange Act
The federal plaintiffs argue that the event contracts targeted by Arkansas are “swaps” under the Commodity Exchange Act. They contend 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 further 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 Campaign Spans Multiple States
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. The Tenth Circuit denied Kalshi’s 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.
Separate Ruling Challenges CFTC’s Legal Premise
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.
That ruling stands in tension with the federal government’s position in the Arkansas case. The DOJ and CFTC argue event contracts on regulated exchanges fall squarely within the CFTC’s exclusive jurisdiction under the same statute. How courts ultimately resolve that tension will shape the regulatory landscape for prediction markets across the country.
