DOJ and CFTC Sue Arkansas to Shield All Federally Regulated Prediction Markets

TLDR

The DOJ and CFTC sued Arkansas on November 12 over its enforcement action against Kalshi.
The federal case seeks protection for all CFTC-regulated exchanges, their affiliates and partners.
Regulators argue the Commodity Exchange Act gives the CFTC exclusive power over derivatives.
Arkansas accuses Kalshi of offering illegal gambling without a state license.
New CFTC guidance gives exchanges 30 days to end location-based blocks on US traders.

The US Justice Department and the Commodity Futures Trading Commission (CFTC) filed a lawsuit against Arkansas on November 12. The filing came eight days after the state sued prediction market operator Kalshi in state court.
The dispute started with Kalshi, but the federal request reaches further. The government is seeking protection for other CFTC-regulated exchanges, their affiliates and their business partners.
The complaint names the State of Arkansas and Attorney General Tim Griffin in his official capacity. It was filed in the US District Court for the Eastern District of Arkansas.
Kalshi is not a party to the federal case. The government brought the lawsuit on its own behalf, separate from the state court fight.

DOJ AND @CFTC SUE ARKANSAS TO BLOCK ENFORCEMENT BEYOND @Kalshi
They seek to halt the state’s gambling case and bar probes tied to trades on CFTC-regulated exchanges. The requested protection includes affiliates and partners.
Read more here:https://t.co/reav0f1NDS
— The Defiant (@DefiantNews) November 13, 2026

What the Federal Government Wants
Federal attorneys argue that the Commodity Exchange Act gives the CFTC exclusive authority over regulated derivatives markets. Under that view, a state cannot apply its gambling rules to event contracts covered by federal commodities law.
The complaint asks the court to declare the Arkansas restrictions preempted by federal law. It also seeks preliminary and permanent injunctions blocking enforcement against CFTC-regulated exchanges.
The filing sets out the government’s legal position. A judge has not yet ruled on any of the claims.
This is not the first time the CFTC has made this argument in court. The agency brought similar claims in earlier lawsuits against states, including Utah, in disputes over sports-related prediction contracts.
The CFTC has also proposed rules that would define event contracts as swaps. Swaps fall under the agency’s federal oversight.
The Arkansas Case Against Kalshi
The federal suit follows a case Griffin filed on November 4 against KalshiEX LLC and Kalshi Inc. Arkansas brought that lawsuit in Independence County Circuit Court.
The state alleges that Kalshi offers illegal gambling without meeting Arkansas licensing requirements. It also claims the companies broke the Arkansas Deceptive Trade Practices Act.
Griffin said Arkansas law looks at what an activity actually is, not what it is called. His position is that calling a wager a contract does not change how state law treats it.
Arkansas is seeking restitution, money penalties, unpaid taxes and limits on Kalshi’s conduct. These remain allegations, and no court has found that Kalshi broke state law.
On November 5, one day after Arkansas sued Kalshi, the CFTC published guidance on impartial access rules for designated contract markets. The guidance addresses whether exchanges can block traders based on where they live in the US.
The agency said exchanges generally cannot restrict otherwise eligible US traders based only on their domestic location. It also told exchanges to review similar limits imposed by intermediaries.
Exchanges have 30 days from the November 5 notice to end geographic blocks that do not comply. Those that cannot comply must explain the barriers to the CFTC.
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