DOJ and CFTC sue Arkansas over Kalshi event contract action
The federal complaint asks the court to bar Arkansas from enforcing gambling and consumer protection laws against event contracts on CFTC-regulated exchanges.
Key takeaways:
- The US Department of Justice and the CFTC filed a federal lawsuit against Arkansas on November 12 over the state’s attempt to take legal action against Kalshi.
- The complaint, filed in the US District Court for the Eastern District of Arkansas, names the state and Attorney General Tim Griffin as defendants.
- The agencies argue the Commodity Exchange Act gives the CFTC exclusive jurisdiction over derivatives traded on designated contract markets, including the event contracts at issue.
US.- The US Department of Justice (DOJ) and the Commodity Futures Trading Commission (CFTC) have filed a federal lawsuit against Arkansas over the state’s attempt to take legal action against prediction market operator Kalshi. Filed on November 12, the complaint seeks to prevent the state from applying its gambling and consumer protection laws to event contracts traded on federally regulated exchanges.
The federal complaint, filed in the US District Court for the Eastern District of Arkansas, names the state and Arkansas Attorney General Tim Griffin as defendants. It argues that the Commodity Exchange Act gives the CFTC exclusive jurisdiction over derivatives traded on designated contract markets, including the event contracts at the centre of the Arkansas case.
The DOJ and CFTC are asking the court to declare that Arkansas cannot enforce its gambling and consumer protection laws against these transactions. Their request for preliminary and permanent injunctions extends beyond Kalshi to other CFTC-registered exchanges, as well as their affiliates and business partners.
Griffin brought lawsuits against Kalshi and online gaming company Virtual Gaming Worlds (VGW), alleging that they offered illegal gambling in the state. Filed on November 4, the complaints also accuse the companies of misleading consumers about the legality of their products. Griffin is seeking restitution for affected customers, civil penalties and unpaid taxes, as well as court orders preventing both companies from commercialising their products.
In the case against Kalshi, Griffin argued that the company’s event contracts constitute gambling rather than financial prediction products. He pointed to features such as self-exclusion options, deposit limits and problem-gambling resources, which he said are typically associated with gambling operators.
Frequently asked questions (FAQs)
- What are the DOJ and CFTC asking the court to do? They want the court to declare that Arkansas cannot enforce its gambling and consumer protection laws against these transactions. They also seek preliminary and permanent injunctions, which would extend beyond Kalshi to other CFTC-registered exchanges, their affiliates and business partners.
- What is Arkansas’s case against Kalshi? Griffin filed a lawsuit on November 4, alleging Kalshi offered illegal gambling without the required licences and misled consumers about legality. He argues its event contracts are gambling, citing features such as self-exclusion options, deposit limits and problem-gambling resources. He seeks restitution, civil penalties and unpaid taxes.
