At a glance

  • The US Department of Justice and the Commodity Futures Trading Commission (CFTC) sued Arkansas Attorney General Tim Griffin on Thursday in the US District Court for the Eastern District of Arkansas, seeking to block the state’s enforcement action against Kalshi, The Block reported.
  • The agencies also want a ban on similar state action against other CFTC-regulated platforms. The Block said it had asked Kalshi and Griffin’s office for comment.

Preemption is the legal idea that when federal law and state law collide, federal law wins. The federal complaint rests on it, and it is the same argument the agencies made when the CFTC and Justice Department sued Utah in October.

What the complaint argues

According to The Block, the filing says the Commodity Exchange Act (CEA) gives the CFTC “exclusive jurisdiction” over futures, options and swaps traded on regulated platforms such as Kalshi. It argues that the event contracts Arkansas is targeting are swaps, and that the state’s attempt to stop a CFTC-regulated platform from offering them “intrude[s] on the exclusive federal scheme”.

The agencies are asking for a preliminary injunction, an early court order that freezes the situation while the case is argued, and a permanent one. The Defiant described the request as reaching beyond Kalshi, to investigations tied to transactions on CFTC-regulated exchanges. The Block said it would also stop future state actions against such platforms.

The state case it targets

Griffin sued Kalshi on 4 Nov in state court, saying its sports and other contracts amount to illegal gambling under Arkansas law. His release says the relief he seeks includes restitution, penalties, taxes and injunctive relief. We covered it when Arkansas sued Kalshi. An allegation is not a finding; neither court has ruled.

The CFTC’s chair, Michael Selig, said in a statement quoted by The Block last week that “Congress entrusted the CFTC to be the federal regulator with sole responsibility to oversee these markets”. The same report counted at least 10 states the CFTC had already sued.

Why it matters

The courts are not lining up neatly. A federal judge in New York recently ruled Novig’s sports contracts are not swaps, which is the opposite of the federal government’s position here. The Block also noted that Louisiana’s attorney general sued Kalshi, Polymarket, Robinhood and Coinbase on Thursday.

What happens next

The Block reported no hearing date and no response from Kalshi or Arkansas. This desk has not read the complaint itself, so the details above are as reported. Watch for Arkansas’s reply to the injunction request and for any move to merge the federal case with the state one.

This article is for information only and is not investment advice.