Key takeaways

• The U.S. Justice Department and the CFTC sued Arkansas and its attorney general to block the state’s enforcement action against Kalshi.
• Arkansas is the 11th state the CFTC has targeted as it argues that federally regulated event contracts fall under its exclusive jurisdiction.
• CFTC Chair Michael Selig said he would rather settle the dispute at the Supreme Court than fight case by case.

The U.S. Department of Justice and the Commodity Futures Trading Commission have sued Arkansas to block its enforcement action against prediction market Kalshi, The Block reported. Arkansas is the 11th state the federal regulator has taken on over event contracts.

The complaint was filed Thursday in the U.S. District Court for the Eastern District of Arkansas. It names the state and Attorney General Tim Griffin as defendants and argues that the Commodity Exchange Act gives the CFTC “exclusive jurisdiction” over futures, options and swaps traded on regulated platforms such as Kalshi.

The agencies said the event contracts targeted by Arkansas are swaps, and that the state’s efforts “intrude on the exclusive federal scheme.” They are asking for preliminary and permanent injunctions that would stop Arkansas from investigating or enforcing state law against federally regulated exchanges.

Griffin sued Kalshi on Nov. 4, accusing it of running an illegal gambling platform. The state also alleges Kalshi let customers aged 18 to 20 take part, below Arkansas’s casino age of 21, Bitcoin.com News reported. It is seeking restitution, unpaid taxes and penalties of up to $10,000 per violation.

In their 34-page complaint, the federal agencies warned that the penalties could add up to hundreds of millions of dollars. “The CFTC will continue to defend its sole jurisdiction over these federally regulated markets as granted by Congress under the Commodity Exchange Act,” CFTC Chairman Michael Selig said.

More States Join the Fight

The CFTC and DOJ have already sued Arizona, Connecticut, Illinois, Kentucky, Minnesota, New Mexico, New York, Rhode Island, Wisconsin and Utah. Courts have granted preliminary protection against state action in Arizona, Illinois and Minnesota, while other rulings have favored the states, Bitcoin.com News said.

The complaint also points to the CFTC’s Nov. 5 guidance on impartial access, which tells regulated exchanges to remove certain geographic restrictions within 30 days or explain why they cannot. The agencies argue that Arkansas’s action would force Kalshi to block state residents, contradicting that rule.

Louisiana also filed a lawsuit on Thursday against companies including Kalshi, Polymarket, Robinhood and Coinbase. “For too long, they have violated our laws with impunity,” Attorney General Liz Murrill said on X, adding that she was seeking an immediate restraining order and an injunction.

Speaking at the Cantor Convergence conference on Friday, Selig called the state cases “really egregious.” He said, “We’re seeing states bring criminal charges, essentially trying to lock up founders and CEOs of these companies,” according to The Block.

Selig, whom Trump nominated to lead the CFTC last year, wants the question settled at the Supreme Court. He is currently the commission’s only member, while the Senate weighs four new SEC and CFTC nominees. Kalshi and Griffin’s office had not commented to The Block.