Courts Reject Kalshi's Bids to Block State Gambling Laws

Kalshi lost two more rounds in federal appeals courts this week, as judges declined to block state gambling laws in Connecticut, New York and Nevada from reaching the prediction-market platform, according to Ars Technica. The company is now also facing a new lawsuit from the Arkansas attorney general, adding to a stack of state-level legal fights playing out at the same time.

The common thread across every case is a single legal question: does state gambling law reach a platform that calls its contracts "swaps" rather than bets? Kalshi has argued its products fall under the exclusive jurisdiction of the US Commodity Futures Trading Commission, which regulates derivatives markets, and therefore cannot be touched by state gambling statutes. State officials have countered that the label on the product does not change what customers are doing with their money.

Why is Arkansas suing Kalshi now?

Arkansas Attorney General Tim Griffin filed his lawsuit in state court, arguing that Kalshi has been letting Arkansans wager on "just about anything" without the licenses, oversight or tax payments the state requires of gambling operators, according to Ars Technica's report on Griffin's announcement. "Kalshi insists that its products are not gambling," Griffin said, but "Arkansas law is concerned with substance, not semantics."

Griffin's complaint also flags an age issue: Arkansas law sets a minimum age of 21 for electronic wagering accounts, but Kalshi has opened its platform to users as young as 18, he said. "Instead of obtaining the licenses, submitting to the oversight, complying with the restrictions, and paying the taxes required of lawful gambling operators in Arkansas, Kalshi opened its platforms to Arkansas consumers, including individuals as young as 18 years old, encouraged them to wager real money on sporting and entertainment events, and profited from those wagers," Griffin said, according to the outlet.

What did the Ninth Circuit decide on Nevada sports bets?

The Arkansas suit lands roughly a week after a string of setbacks elsewhere. In August, a three-judge panel on the US Court of Appeals for the Ninth Circuit unanimously ruled that Nevada can stop Kalshi from offering sports bets, finding that those contracts are not swaps and can be regulated under the state's gambling laws, Ars Technica reported.

Kalshi asked the full Ninth Circuit — all 29 judges — to rehear the case. Not one judge agreed to take it up. "The full court has been advised of the petiti[on]," the court noted in rejecting the request, according to the outlet's account, leaving the panel's ruling intact and Nevada's gambling restrictions enforceable against the company.

How does the Trump administration factor into the dispute?

The federal government has not stayed neutral. The Trump administration is on Kalshi's side in the broader fight over whether state gambling law can reach prediction markets, Ars Technica reported, and Donald Trump Jr. serves as an advisor to the company in exchange for an equity stake. That alignment puts the executive branch's preferred reading of federal preemption directly at odds with a growing list of state attorneys general pursuing their own enforcement actions.

What other states are pursuing Kalshi, and what comes next?

Arkansas is not acting alone. Utah Attorney General Derek Brown filed criminal charges against Kalshi and its founders roughly a week before Griffin's lawsuit, after a federal judge in Utah ruled that the state can enforce its anti-gambling laws against the company, according to Ars Technica. Connecticut and New York have also pressed their own cases, both of which were part of the appellate losses this week.

Kalshi has not lost every fight — the company has won some rulings along the way, the outlet noted — but the pattern of recent decisions has given state officials like Griffin reason to move forward with new litigation rather than wait. With multiple circuits now weighing in and state attorneys general filing both civil and criminal actions, Ars Technica reported that the US Supreme Court may ultimately have to decide whether states can enforce their gambling laws against prediction-market platforms at all.

Kalshi did not respond to a request for comment from Ars Technica by the time of its report; the outlet said it would update its story if the company responds.