Arkansas Sues Kalshi as State Gambling Crackdown Adds Another Front

Arkansas is taking Kalshi to court, arguing that calling its products prediction markets does not put them outside the state’s gambling laws.

Attorney General Tim Griffin sued KalshiEX LLC and Kalshi Inc. Wednesday, alleging violations of the Arkansas Deceptive Trade Practices Act.

The state is seeking:

• Restitution

• Penalties

• Taxes

• Injunctive relief

“Arkansas law is concerned with substance, not semantics,” Griffin said in a release. “It doesn’t take a genius to understand that wagering money on whether the Razorbacks win or lose is gambling.”

The lawsuit was filed in Independence County Circuit Court. Griffin separately sued sweepstakes casino operator VGW in White County Wednesday, applying the same central argument to a different business model: companies cannot avoid state gambling requirements simply by describing their products differently.

The Kalshi filing opens a new state enforcement front, but not an entirely new federal appellate circuit. Arkansas lies within the Eighth Circuit Court of Appeals, where Kalshi’s challenge against Iowa officials is already on appeal. The Arkansas case begins in state court; reaching the federal courts would require further procedural steps.

Arkansas targets licensing, marketing and access by younger users

Griffin alleges Kalshi made sports and entertainment contracts available to Arkansas consumers without obtaining the licenses, submitting to oversight or paying the taxes required of lawful gambling operators. His announcement also highlights access by users as young as 18.

The complaint describes the platform as a “pocket-sized bookie.” The state alleges that Kalshi is misleading consumers about the legality of its products while operating outside Arkansas’s restrictions on casinos and sports betting.

Griffin also points to Kalshi’s consumer-protection features as evidence that its business carries gambling-related risks. Those include self-exclusion, deposit limits, trading breaks and its partnership with the National Council for Problem Gambling.

“Kalshi is not blind that its platform presents real, tangible risks to its users,” he said, citing excessive wagering, financial losses and mental health harms.

The attorney general’s “unregulated” description also requires a distinction: Kalshi is regulated by the U.S. Commodity Futures Trading Commission (CFTC). The dispute is whether that federal status displaces Arkansas’s gambling requirements, not whether the exchange has any regulator at all.

VGW faces a separate sweepstakes lawsuit

The same-day case against VGW targets the company’s dual-currency casino model, not federally regulated event contracts.

VGW operates brands including:

• Chumba Casino
• LuckyLand Slots
• Global Poker

Griffin alleges that customers buy Gold Coins and receive bonus Sweeps Coins, which they can use in casino-style games and redeem for cash winnings. He argues that separating the purchased currency from the redeemable currency does not make the activity non-gambling.

“Companies that operate gambling businesses in Arkansas are subject to our gambling laws, plain and simple,” Griffin said.

The VGW lawsuit also alleges Deceptive Trade Practices Act violations and seeks restitution, penalties, taxes and injunctive relief.

The two cases share an enforcement rationale but present different legal questions. VGW’s dispute concerns a sweepstakes structure; Kalshi’s national defense centers on federal commodities jurisdiction.

Another case within the Eighth Circuit’s territory

Arkansas adds pressure in a region already considering Kalshi’s federal-preemption argument.

In KalshiEX LLC v. Bird, the exchange appealed an Iowa district court’s denial of preliminary protection against state enforcement. The Eighth Circuit granted an extension on Oct. 28, giving Kalshi until Dec. 7 to file its brief and appendix.

That appeal could influence how federal courts within the circuit approach related disputes.

If the Arkansas case is removed to federal court, disputes over jurisdiction or the merits could eventually create another route to the Eighth Circuit.

The filing follows fresh appellate setbacks for Kalshi

Arkansas’s lawsuit arrived the same day the Ninth Circuit declined to revisit its Nevada decision.

On Wednesday, the court denied panel rehearing and rehearing en banc, leaving its August preliminary-injunction ruling against Kalshi intact. No judge requested a vote on en banc review.

A day earlier, the Second Circuit denied injunctions pending appeal in Kalshi’s New York and Connecticut cases and Coinbase’s Connecticut case. Those appeals continue; the order denied temporary protection rather than deciding the federal-preemption question on the merits.

The results are not uniform nationwide. The Third Circuit sided with Kalshi in New Jersey, and an Illinois federal judge entered a preliminary injunction Oct. 30 protecting covered event contract activity from specified state enforcement. Illinois appealed that order.

As DeFi Rate’s litigation tracker documents, the legal landscape remains divided, not a single national authorization or prohibition.

Supreme Court review remains possible, not guaranteed

The disagreement has already generated U.S. Supreme Court petitions, including New Jersey’s request to review the Third Circuit’s pro-Kalshi decision. The justices have not agreed to hear those cases.

Kalshi’s response deadline in the New Jersey matter is now Dec. 7 following an extension granted Oct. 30, replacing an earlier Nov. 9 deadline.

For Arkansas, the immediate objective is state-level relief: a declaration of unlawful conduct, financial recovery and an order stopping the challenged practices.

Griffin’s filing adds another enforcement case while the national jurisdictional question remains unsettled. The accompanying VGW lawsuit makes the broader message clear: Arkansas is challenging both businesses under its consumer-protection law, even though their products and legal defenses differ materially.