The United States and the Commodity Futures Trading Commission sued the State of Arkansas and Attorney General Tim Griffin in federal court on November 12, asking a judge to stop the state’s enforcement case against prediction market Kalshi and to bar Arkansas from investigating or taking enforcement action against federally regulated exchanges, their affiliates and their partners. The complaint, filed in the US District Court for the Eastern District of Arkansas, argues that the event contracts Arkansas is targeting are swaps under the Commodity Exchange Act, which gives the CFTC exclusive jurisdiction over swaps traded on regulated exchanges, and that Arkansas law is therefore preempted as applied to those trades. Kalshi, which the commission designated as a contract market in 2020, is not a party to the federal case.
Arkansas sued Kalshi Inc. and KalshiEX LLC on November 4 in the Circuit Court of Independence County, bringing claims under the state’s Deceptive Trade Practices Act and for unjust enrichment, and describing the platform, in the federal complaint’s quotation, as in large part a straightforward gambling platform. The state seeks an injunction, restitution, damages and unpaid taxes, plus civil penalties of up to 10,000 dollars per violation, which the federal filing notes could reach hundreds of millions of dollars against fees it puts at between 0.07 and 2.63 dollars per 100 contracts on most trades. The federal complaint lists preemption actions involving ten other states and says courts in Arizona, Illinois and Minnesota have issued preliminary injunctions favouring the federal side; Arkansas is the eleventh state the commission has sued in the prediction market disputes, and no judge has ruled in this case.