Historical report: Based on Decrypt’s article published November 5, 2026, at 18:28:58 UTC+8. The legal developments below reflect that reporting date.
Arkansas sued KalshiEX LLC and Kalshi Inc., alleging that the prediction-market operator offered residents an illegal, unregulated gambling platform. Attorney General Tim Griffin announced the action on November 4, 2026.
The lawsuit alleges multiple violations of the Arkansas Deceptive Trade Practices Act and seeks restitution, penalties, taxes and an injunction. These are the state’s allegations, not findings of wrongdoing.
The dispute: event contracts or gambling?
Griffin alleged that Kalshi allowed Arkansas residents as young as 18 to wager on sports and entertainment events without obtaining the licenses or paying the taxes required of gambling operators.
“It doesn’t take a genius to understand that wagering money on whether the Razorbacks win or lose is gambling,” Griffin said. “And gambling on an unregulated platform is squarely prohibited by Arkansas law.”
He also cited Kalshi’s self-exclusion tools, deposit limits, trading breaks and partnership with the National Council on Problem Gambling as evidence that the company recognizes gambling-style risks. That is the attorney general’s interpretation of those safeguards, rather than a judicial determination of the platform’s legal status.
Kalshi is regulated by the Commodity Futures Trading Commission. In other cases, it has argued that its event contracts fall under exclusive federal jurisdiction and therefore are not subject to state gambling laws.
The central issue is consequently not just what the products are called, but which regulator has authority over them. Federal oversight and state allegations of illegal gambling remained in direct conflict at the time of the report.
A widening set of state challenges
Arkansas joined more than a dozen states taking action against prediction markets. Decrypt summarized several major disputes:
- Utah: The state filed felony charges against Kalshi and co-founders Tarek Mansour and Luana Lopes Lara the week before the report, alleging illegal gambling promotion. Kalshi called the charges “a crazy overreach.”
- New York: Attorney General Letitia James sued Kalshi in July, seeking at least $36 billion. The CFTC invoked its emergency powers to keep Kalshi operating.
- Michigan: A state judge barred Kalshi from offering sports contracts in September, threatening a $500,000 daily fine if it failed to block Michigan residents.
- Kentucky: The state sued Kalshi, Polymarket and their brokerage partners Coinbase, Robinhood and Webull in June.
- Minnesota: Kalshi sued in May to block a law described as the nation’s first making it a felony to operate or advertise a prediction market. A federal judge blocked the ban in July, finding it was likely preempted by federal law.
- Illinois: Kalshi sued in June over a new law requiring prediction markets to obtain sports-betting licenses and pay state taxes.
Arizona also filed criminal charges against Kalshi in March. A Washington court temporarily blocked its sports contracts in July. In Massachusetts, a case had reached the state’s highest court after a lower court barred Kalshi’s sports contracts in January.
Federal authority remained unsettled
The CFTC had sued at least 10 states to defend what it described as its exclusive authority over prediction markets. President Donald Trump backed the agency and called several state officials challenging the platforms “scum.”
Federal appeals courts had reached conflicting conclusions. The Third Circuit ruled in April that New Jersey could not regulate Kalshi’s sports contracts, while the Sixth and Ninth Circuits sided with Ohio, Tennessee and Nevada.
New Jersey asked the Supreme Court to resolve the issue, with support from 39 other states, the District of Columbia and the NFL. According to ESPN, Kalshi’s response was due November 9, 2026, and the Court was not expected to decide whether to hear the case until December at the earliest.
The record described competing legal claims and divergent court rulings—not a settled nationwide answer about the reach of state gambling laws over federally regulated event contracts.