The lawsuit, filed Thursday in the U.S. District Court for the Eastern District of Arkansas, adds to a growing legal dispute over who has the authority to regulate prediction markets.
DOJ Says Federal Law Gives CFTC Authority Over Prediction Markets
The DOJ and CFTC argue that the Commodity Exchange Act gives the federal regulator exclusive jurisdiction over commodity futures, options and swaps traded on regulated platforms such as Kalshi. The agencies contend that the event contracts targeted by Arkansas qualify as swaps under federal law. They argue that the state’s attempt to restrict Kalshi’s operations conflicts with the federal regulatory framework governing these products.
The lawsuit seeks preliminary and permanent injunctions to prevent Arkansas from enforcing its gambling laws against CFTC-regulated exchanges. It also seeks to stop the state from pursuing similar actions against other platforms operating under federal oversight. The federal action follows Griffin’s Nov. 4 lawsuit against Kalshi in Independence County Circuit Court. The attorney general accused the company of operating an illegal gambling platform that allows Arkansas residents to wager on the outcomes of various events.
His office is seeking restitution, civil penalties, unpaid taxes and an injunction against Kalshi’s operations in the state. Kalshi is not a defendant in the federal lawsuit. The DOJ and CFTC filed the case independently to challenge the state’s authority to enforce its gambling laws against federally regulated platforms.
The jurisdictional dispute also comes as prediction markets attract greater participation from retail investors. Robinhood’s expansion of retail access to prediction markets reflects the growing commercial interest in the sector, although the linked report focuses on the company’s separate retail investment developments.
Investor Takeaway
The DOJ and CFTC argue that federal law gives the agency exclusive authority over regulated event contracts, making Arkansas’ attempt to enforce its gambling laws against Kalshi unlawful.
More States Join the Fight Against Prediction Markets
Arkansas is not the only state challenging prediction market operators. Louisiana Attorney General Liz Murrill filed a separate lawsuit on Thursday against Kalshi, Polymarket, Robinhood and Coinbase, seeking to restrict their operations in the state. The case also names seven additional prediction market operators. The Louisiana lawsuit targets 11 prediction market operators, extending the legal pressure beyond the platforms most commonly associated with prediction markets.
The dispute has also produced mixed results for Kalshi in other jurisdictions. A federal judge last week granted a preliminary injunction barring the platform from offering sports-event contracts on tribal lands belonging to the Blue Lake Rancheria and Chicken Ranch Rancheria of Me-Wuk Indians in California.
A Kalshi spokesperson said the company had already voluntarily withdrawn its services from those tribal lands in September.
Beyond prediction markets, financial institutions are also expanding their use of blockchain-based financial products. Franklin Templeton has extended its tokenized money market fund collateral programme to Bybit, allowing eligible users to borrow against fund shares without transferring the underlying assets to the exchange.
Investor Takeaway
Arkansas and Louisiana are stepping up legal action against prediction market operators, while court rulings elsewhere highlight the growing conflict between state gambling laws and federal oversight.