Arkansas Attorney General Sues Kalshi For Alleged Illegal Gambling

• The state of Arkansas and Attorney General Tim Griffin have sued prediction market Kalshi
• The lawsuit alleges Kalshi offers illegal sports betting and gambling in the state
• Arkansas is requesting to prevent Kalshi’s continued alleged illegal offerings, civil penalties, and payment of unpaid taxes

The state of Arkansas and Attorney General Tim Griffin this week levied a lawsuit against prediction market company Kalshi for alleged illegal gambling.

Griffin filed the lawsuit in the Circuit Court of Independence County, Arkansas Civil Division, noting the state permits casino gaming and sports betting only within strict limits. Kalshi, the lawsuit states, chooses to ignore the state’s regulations and operate without a license, comply with rules, and pay the taxes required of lawful gambling operators.

“Kalshi has built a global business that it calls a prediction market, allowing consumers to wager money on the outcome of just about anything. You can wager on the outcome of elections, reality competition shows, football games, and much more. 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,” Griffin said in a press release.

Civil Penalties and Unpaid Taxes

The lawsuit requests an injunction be put in place to prohibit Kalshi from offering its alleged illegal gambling services in the state, a civil penalty of $10,000 per each violation, and the payment of unpaid taxes for all applicable years owed to Arkansas.

Kalshi alleges its sports event contracts are swaps under the Commodity Exchange Act (CEA) and under the regulatory jurisdiction of the Commodity Futures Trading Commission (CFTC). The filed lawsuit alleges Kalshi offers illegal, unlicensed gambling and sports betting through its sports event contracts.

“Although Kalshi insists that its products are not gambling, its actions speak louder than its labels. Kalshi offers self-exclusion tools, deposit limits, trading breaks, and other tools commonly associated with gambling operators to help users stay in control of wagering activity. It promotes gambling addiction resources, including its own partnership with the National Council for Problem Gambling. 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,” Griffin said in a press release.

The lawsuit claims Kalshi is in violation of the Arkansas Deceptive Trade Practices Act, which prohibits deceptive practices, including “”[k|nowingly making a false representation as to the characteristics, ingredients, uses, benefits, alterations, source, sponsorship, approval, or certification of goods or services or as to whether goods are original or new or of a particular standard, quality, grade, style, or model.”

It also broadly prohibits false or deceptive acts in business, commerce, or trade.

Sports Betting By Any Other Name

The state alleges Kalshi’s sports event contracts constitute sports betting at its base level. Through its platform, Kalshi allows user to “risk money on the same sporting events, player performances, and game outcomes long offered by traditional sportsbooks.”

The state also notes that Kalshi allows users who are 18 access their markets, while Arkansas prohibits those under 21 from registering a sports betting account.

“That’s why I have brought this lawsuit today to hold Kalshi accountable for multiple violations of the Arkansas Deceptive Trade Practices Act. The relief we are seeking includes restitution, penalties, taxes, and injunctive relief,” Griffin said.