Arkansas Sues Kalshi, Alleging Deceptive Trading Practices and Unjust Enrichment

Arkansas Sues Kalshi, Joins Other States In Semantics Battle

Kalshi, one of the largest prediction market platforms in the U.S. with billions in volumes traded, is being sued by Arkansas for its involvement in illegal gambling practices.

On Wednesday, Arkansas Attorney General Tim Griffin filed a lawsuit against KalshiEX LLC and Kalshi Inc., the owners and operators of the prediction market platform Kalshi, alleging they violated the Arkansas Deceptive Trade Practices Act by offering event products without a license to operate in the state.

Griffin claims that while Kalshi offered its services as event contracts, they constitute unlicensed forms of sports betting and casino gaming, bypassing the state framework to comply with Arkansas regulation. Furthermore, the state alleges that Kalshi allowed underage users to access these products, violating the state’s 21-year-old limit for involvement in these activities.

Finally, Arkansas says Kalshi deceived users by claiming its platform was regulated and legal while knowingly omitting the risks of professional and insider trading in its operations.

Griffin stressed that Arkansas law was concerned “with substance and not with semantics,” and that the gambling activity was regulated to protect customers.

“It doesn’t take a genius to understand that wagering money on whether the Razorbacks win or lose is gambling. And gambling on an unregulated platform is squarely prohibited by Arkansas law,” he explained.

“Kalshi is not blind that its platform presents real, tangible risks to its users, including excessive wagering, financial losses, depression, and other mental health harms. That’s why I have brought this lawsuit today to hold Kalshi accountable for multiple violations of the Arkansas Deceptive Trade Practices Act,” Griffin concluded.

Initially, Arkansas seeks confirmation that Kalshi violated state gambling laws and an injunction to halt the company’s operations in the state. It also asks for restitution to consumers suffering financial losses and disgorgement of the funds the company acquired through unjust enrichment.

Financially, Arkansas calls for maximum civil penalties in accordance with state law, reaching up to $10,000 per violation, to recover unpaid taxes since the company started operating in Arkansas, and to pay for the lawsuit fees and costs.

Arkansas is the latest state to dispute the notion that event markets do not constitute gambling, with the company already facing similar allegations in Utah, Missouri, Tennessee, and New York, setting up a federal vs. state law fight where the Commodity Futures Trading Commission (CFTC) has also filed lawsuits against some states.

The CFTC has claimed it holds exclusive jurisdiction to regulation prediction markets, but states continue to challenge that claim. A coalition of 44 state AGs has alleged that the CFTC lacks authority over these markets, as it “drastically expands federal regulatory authority in an area of major economic and political consequence that states have traditionally regulated.”

Kalshi traded $4.15 billion in notional volume on Election Day, Nov. 3, its biggest weekday yet—but still well below the…