Kalshi court ruling on prediction markets: Arkansas sues as Ninth Circuit denies rehearing

Arkansas Attorney General Tim Griffin sued Kalshi and VGW on November 4, accusing the prediction markets operator and the sweepstakes company of running illegal gambling businesses in the state. The same day brought another Kalshi court ruling in the wider fight over prediction markets: the Ninth Circuit refused to rehear Nevada's case, leaving state gaming regulators free to enforce their gambling laws against the exchange.

Griffin filed both complaints under the Arkansas Deceptive Trade Practices Act, seeking restitution of customer losses, civil penalties, unpaid taxes and injunctions against the companies. "Companies that operate gambling businesses in Arkansas are subject to our gambling laws, plain and simple," Griffin said in a news release. Kalshi did not reply to a request for comment from SBC Americas before publication.

Arkansas calls Kalshi a pocket-sized bookie

The Kalshi complaint separates derivatives that hedge economic risk from contracts on football games, elections and awards shows. "When it comes to the majority of its offerings, Kalshi is not a risk management tool; it is a pocket-sized bookie," it states.

Griffin's argument borrows Kalshi's own consumer protections. The state cites self-exclusion tools, deposit limits and trading breaks, along with the company's partnership with the National Council on Problem Gambling, and argues Kalshi would not offer them "if its products carried none of the risks associated with gambling." The complaint also alleges Kalshi admits users aged 18 to 20, while Arkansas requires casino gambling customers to be at least 21.

The suit follows an October 2025 opinion from Griffin's office, written in response to questions from state Sen. Bryan King, that concluded a business model like Kalshi's was gambling under Arkansas law and needed a license.

VGW's dual-currency model

The VGW suit targets the model used by Chumba Casino, LuckyLand Casino and Global Poker: customers buy Gold Coins bundled with Sweeps Coins that can be redeemed for cash prizes. "Gold Coins provide the extra Step Defendants rely on to transform, at least in name, a purchase of gambling currency into a 'free' sweepstakes," the complaint states. "While Defendants may think this distinction is clever, it is not legal."

VGW has faced similar actions from attorneys general in Kentucky and Florida without leaving those states, Gambling Insider reported. The company has also defended dozens of class actions through its arbitration clauses.

What the Ninth Circuit ruling means

The three-judge panel that ruled against Kalshi in August unanimously denied both panel rehearing and rehearing en banc. "The full court has been advised of the petition for rehearing en banc and no judge has requested a vote on whether to rehear the matter en banc," the order said, as reported by Legal Sports Report.

The August decision held that Kalshi's sports event contracts likely do not qualify as swaps, so federal commodities law likely does not preempt Nevada's gaming laws. "The substance of the sports event contracts offered on Kalshi's DCM is sports gambling, regardless of whether Kalshi calls them swaps," the panel wrote. The Nevada Gaming Control Board can now pursue enforcement.

The ruling reaches the other states in the Ninth Circuit: Alaska, Arizona, California, Hawaii, Idaho, Montana, Oregon and Washington. Gambling Insider reported the denial could help Arizona's effort to overturn a preliminary injunction blocking enforcement there. Kalshi's 78-page rehearing petition, filed by attorney Paul Clement, argued the ruling exposes the company to civil and criminal liability even though it operates under the supervision of the Commodity Futures Trading Commission.

On November 3, a day before the Ninth Circuit order, the Second Circuit denied Kalshi's request to temporarily block New York and Connecticut officials from enforcing their gambling laws, GamblingNews reported.

Elsewhere the record is mixed. The Sixth Circuit allowed Ohio and Tennessee to enforce their gambling laws, and Ohio sent cease-and-desist orders to 10 operators and brokers last month. Kalshi holds a preliminary injunction in New Jersey, upheld 2-1 by the Third Circuit in April. It is appealing a loss to Utah in the Tenth Circuit, where the state filed criminal charges against its co-founders.

Kalshi's 90 days and the CFTC's November 18 deadline

Kalshi has 90 days to petition the Supreme Court. The justices are already weighing a separate case from New Jersey, where the Third Circuit sided with the exchange, and Kalshi's response to that petition is due December 7. Robinhood and Crypto.com have also asked the Supreme Court to review rulings against them in Nevada.

The CFTC issued a notice of proposed rulemaking and an interim final rule on its jurisdiction over event contracts on October 9. Comments are due November 18. GamblingNews noted Kalshi could wait for that process to advance before seeking Supreme Court review.

For now, the Nevada dispute is unresolved, and no preliminary injunction stands between Kalshi and state regulators there.