DOJ, CFTC Sue Arkansas Attorney General Over Kalshi Gambling

Kalshi, a prediction market platform, is at the center of a new federal case. On Thursday, the U.S. Department of Justice (DOJ) and the Commodity Futures Trading Commission (CFTC) sued Arkansas Attorney General Tim Griffin to stop the state from enforcing its gambling laws against the company. The suit was filed in the U.S. District Court for the Eastern District of Arkansas, and it adds to a growing legal dispute over who has authority to regulate prediction markets.

Federal argument over event contracts

The agencies say the Commodity Exchange Act gives the CFTC exclusive jurisdiction over commodity futures, options and swaps traded on regulated platforms such as Kalshi. They also contend that the event contracts Arkansas is targeting qualify as swaps under federal law. Arkansas's attempt to restrict Kalshi's operations, they argue, conflicts with the federal framework that governs these products.

The suit asks for preliminary and permanent injunctions that would bar Arkansas from enforcing its gambling laws against CFTC-regulated exchanges. It also seeks to stop the state from pursuing similar actions against other platforms under federal oversight.

Griffin's state case and other states

The federal filing follows a Nov. 4 lawsuit Griffin brought against Kalshi in Independence County Circuit Court. The attorney general accuses the company of running an illegal gambling platform that lets Arkansas residents bet 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 case. The DOJ and CFTC filed it independently to challenge the state's power to enforce its gambling laws against federally regulated platforms.

Louisiana Attorney General Liz Murrill filed a separate lawsuit on Thursday against Kalshi, Polymarket, Robinhood and Coinbase. Six additional prediction market operators are named alongside them, bringing the number of targeted platforms to 10.

The dispute has produced mixed results for Kalshi in other jurisdictions. Last week, a federal judge 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 A Kalshi spokesperson said the company had already withdrawn its services from those tribal lands voluntarily in September.

Prediction markets are drawing greater participation from retail investors, and Robinhood has expanded retail access to them.

Tokenized funds at Bybit

Financial institutions are also expanding their use of blockchain-based financial products. Franklin Templeton has extended its tokenized money market fund collateral program to Bybit, letting eligible users borrow against fund shares without transferring the underlying assets to the exchange.