The U.S. Department of Justice and the Commodity Futures Trading Commission filed a lawsuit on November 12 in the U.S. District Court for the Eastern District of Arkansas against Attorney General Tim Griffin. The federal agencies seek to block Arkansas from enforcing state actions against the prediction market platform Kalshi. They argue that the Commodity Exchange Act gives the CFTC "exclusive jurisdiction" over commodity futures, options, and swaps traded on regulated platforms.
Federal agencies challenge state gambling claims
The federal complaint asserts that Kalshi’s event contracts constitute swaps under the Commodity Exchange Act. Kalshi operates as a designated contract market that the CFTC approved in 2020. This legal action follows a November 4 lawsuit by Griffin, who alleges Kalshi operates an illegal gambling platform. Griffin claims such activity is "squarely prohibited by Arkansas law." He seeks an injunction, restitution, damages, unpaid taxes, and civil penalties against Kalshi Inc. and KalshiEX LLC.
| Detail | Value |
|---|---|
| Kalshi fee per 100 contracts | $0.07 to $2.63 |
| Maximum penalty per violation | $10,000 |
The federal government argues that Arkansas law is preempted by federal law and cannot be enforced against CFTC-regulated firms. The complaint notes that penalties for violations could reach the hundreds of millions of dollars. It also points to a November 5 CFTC interpretation that gave designated contract markets 30 days to drop domestic geographic restrictions or explain why they cannot.
Growing legal pressure on prediction markets
Louisiana Attorney General Liz Murrill filed a lawsuit on Thursday against companies including Kalshi, Polymarket, Robinhood, and Coinbase. Murrill stated, "For too long, they have violated our laws with impunity. No longer: I am seeking an immediate restraining order and an injunction to restore the rule of law in Louisiana." This follows a recent ruling where a federal judge granted a preliminary injunction barring Kalshi from offering sports-event contracts on lands belonging to two California tribes. A Kalshi spokesperson said the company voluntarily withdrew those services from the tribes’ lands in September.
