Kalshi Sued by Arkansas Over Sports Contracts
Arkansas Attorney General Tim Griffin sued the prediction market Kalshi yesterday, alleging it runs illegal, unlicensed gambling through its sports event contracts. Event contracts are contracts that pay out depending on the outcome of a real-world event. The suit was filed in Independence County.
Griffin said:
It doesn’t take a genius to understand that wagering money on whether the Razorbacks win or lose is gambling. And gambling on an unregulated platform is squarely prohibited by Arkansas law.
Tim Griffin, Arkansas Attorney General
According to the Arkansas Advocate, the complaint relies on the state’s deceptive trade practices act, a consumer-protection law, and accuses Kalshi of operating a “pocket-sized bookie” that lets users as young as 18 wager on sporting and entertainment events. It seeks a declaration that Kalshi violated the law and restitution, meaning repayment of money users lost.
Kalshi has argued in other states that its contracts are swaps regulated by the Commodity Futures Trading Commission (CFTC), the US derivatives regulator, and are not bets. Kalshi had not responded to the Arkansas suit.
The CFTC set out its own position in a release on 27 October, saying it had sued Utah to block state enforcement against prediction markets and had begun proceedings against nine other states. CFTC Chairman Michael S. Selig said Congress had given the agency sole responsibility for overseeing these markets. The CFTC has made no statement on the Arkansas case.
The question underneath is preemption, the doctrine under which federal law overrides state law, and it remains unresolved.
Sources: Arkansas Advocate; CFTC release 9315-26
