The Commodity Futures Trading Commission (CFTC) announced Friday that it has sued Arkansas and Attorney General Tim Griffin, seeking to block the state’s enforcement action against Kalshi and prevent similar efforts targeting federally regulated prediction markets.
The 34-page complaint, filed Nov. 12 by the CFTC and the US government, follows Griffin’s Nov. 4 lawsuit against Kalshi, which accuses the company of operating an illegal gambling platform and misleading Arkansas consumers.
Selig warns against state interference
In a press release Friday, CFTC Chairman Michael S. Selig defended the agency’s authority over event contracts, arguing that Arkansas was attempting to shut down federally regulated markets covering sports, politics and other events.
“The CFTC will continue to defend its sole jurisdiction over these federally regulated markets as granted by Congress under the Commodity Exchange Act, and the Commission will not let state interference thwart its regulatory efforts and destroy federally regulated markets,” Selig said in the release.
The agency said Arkansas is the 11th state it has sued to defend its regulatory jurisdiction. Previous legal challenges have involved Arizona, Connecticut, Illinois, New York, Wisconsin, Minnesota, Rhode Island, New Mexico, Kentucky and, most recently, Utah. The CFTC maintains that the Commodity Exchange Act (CEA) gives it exclusive authority over swaps traded on federally regulated exchanges, including sports-related event contracts.
Complaint warns of massive penalties
Arkansas’ original lawsuit seeks restitution, unpaid taxes and civil penalties under the state’s Deceptive Trade Practices Act, which allows penalties of up to $10,000 per violation.
The CFTC’s complaint argues that those penalties could far exceed Kalshi‘s revenue from Arkansas customers.
“If Arkansas seeks civil penalties on a per-violation basis, the penalties would dwarf Kalshi’s income from its activities in Arkansas and could reach the hundreds of millions of dollars,” the filing states.
The federal government is asking for preliminary and permanent injunctions preventing Arkansas from investigating or enforcing state laws against CFTC-regulated exchanges and their affiliates and partners for transactions on those markets.
The complaint also cites the CFTC’s recent interpretation of impartial-access requirements, arguing that forcing exchanges to exclude Arkansas residents would conflict with federal regulations.
Arkansas faces multiple federal challenges
The CFTC’s intervention follows separate lawsuits filed Nov. 9 by Polymarket US and Crypto.com-backed OG.com, both seeking protection against potential enforcement under Arkansas gambling laws.
Unlike those preemptive lawsuits, the federal government’s new case directly challenges Arkansas’ existing enforcement action against Kalshi.
The complaint also points to preliminary injunctions obtained by the federal government in Arizona, Illinois and Minnesota, where courts have restricted state enforcement against federally regulated exchanges.
The Arkansas case remains pending, with the federal government now seeking an order that could prevent the state from pursuing similar actions against other CFTC-regulated prediction market operators.