The battle over U.S. prediction markets intensified on Thursday as the Department of Justice and Commodity Futures Trading Commission sued Arkansas Attorney General Tim Griffin in federal court, arguing that state gambling laws cannot be used to block CFTC-regulated platforms such as Kalshi.
The lawsuit, filed in the U.S. District Court for the Eastern District of Arkansas, seeks preliminary and permanent injunctions against Arkansas' enforcement efforts. DOJ and CFTC officials contend that the Commodity Exchange Act grants the CFTC exclusive jurisdiction over event contracts offered by regulated exchanges, and that the contracts Arkansas is targeting qualify as swaps under federal law.
The federal move follows Griffin's Nov. 4 state lawsuit against Kalshi in Independence County Circuit Court. That complaint accuses Kalshi of operating an illegal gambling platform and seeks restitution, civil penalties, unpaid taxes and an injunction. Kalshi is not a defendant in the new federal case, which is aimed squarely at the state's authority.
Arkansas is not alone. Louisiana Attorney General Liz Murrill filed a separate lawsuit Thursday against Kalshi, Polymarket, Robinhood and Coinbase, along with seven additional prediction market operators. The Louisiana case targets 11 operators in total and seeks to restrict their operations in the state.
The legal pressure is running alongside continued expansion of prediction market platforms. Kalshi operates as a CFTC-registered designated contract market, while Polymarket is a blockchain-based platform using Polygon and USDC. Probly reports supporting about 5,100 events and 47,000 markets, with 172 active live markets and short-duration crypto Up or Down contracts covering Bitcoin, Ethereum, Solana and XRP. Limitless offers five-minute crypto price markets on the Base layer-2 network using Chainlink data, while Manifold Markets uses virtual Mana currency for forecasting without real-money trading.
A federal judge last week issued a preliminary injunction barring Kalshi from offering sports-event contracts on certain tribal lands in California, although a Kalshi spokesperson said the company had already voluntarily withdrawn services from those lands in September.
The broader dispute is now testing whether federal commodity regulation preempts state gambling enforcement, a question that could shape how prediction markets operate across the United States.
