Arkansas sues Kalshi, says its alleged illegal gambling operations cause mental harm

Arkansas Attorney General Tim Griffin has filed a lawsuit against Kalshi for allegedly operating an illegal gambling platform in the state.

Griffin said in a statement on Wednesday that Kalshi has built a global business that allows users to wager on the outcome of "just about anything."

"It doesn't take a genius to understand that wagering money on whether the Razorbacks win or lose is gambling," Griffin said, adding that such practice is "squarely prohibited" by Arkansas law.

"Although Kalshi insists that its products are not gambling, its actions speak louder than its labels," Griffin added. "Kalshi is not blind that its platform presents real, tangible risks to its users, including excessive wagering, financial losses, depression, and other mental health harms."

Kalshi has previously argued in other lawsuits that its event contracts are derivatives regulated by the Commodity Futures Trading Commission and therefore not subject to state gambling laws.

The Block has reached out to Kalshi for comment on the Arkansas lawsuit.

Escalating legal battles

The lawsuit adds Arkansas to a growing list of states taking legal action against the prediction market platform amid a dispute over whether prediction markets fall under federal derivatives regulations or state gambling laws.

Last week, Utah filed criminal charges against Kalshi, CEO Tarek Mansour, and chief operating officer Luana Lopes Lara, accusing them of illegally promoting online gambling and letting an undercover agent place wagers. The criminal charges came after Utah sued Kalshi and two Susquehanna trading firms, alleging that they operated an illegal gambling business in the state. 

Meanwhile, the CFTC has sued at least 10 states, arguing that the states were intruding on its jurisdiction over prediction markets.

"Congress entrusted the CFTC to be the federal regulator with sole responsibility to oversee these markets," CFTC Chair Michael Selig said in a statement. "As I've said before, the CFTC has the expertise and responsibility to defend its exclusive jurisdiction over commodity derivatives, and that’s exactly what we'll do."