Kalshi faces legal setbacks as courts uphold state gambling regulations

Prediction market platform Kalshi has suffered a series of defeats in federal courts, as two appeals courts rejected the company's attempts to preempt state gambling laws in Connecticut, New York, and Nevada. These rulings coincide with the filing of a new lawsuit against the company by the attorney general of Arkansas.

The central legal dispute concerns whether Kalshi's prediction markets constitute financial "swaps" regulated exclusively by the U.S. Commodity Futures Trading Commission (CFTC) or if they fall under the jurisdiction of state-level gambling statutes. While the company argues its products are financial instruments, regulators increasingly view the platform as facilitating unlicensed wagering.

Arkansas Attorney General Tim Griffin stated that his office is concerned with the substance of the platform's operations rather than its marketing terminology. While Kalshi has sought to position itself as a regulated entity—bolstered by the involvement of advisor Donald Trump Jr.—the mounting litigation from state authorities suggests an ongoing regulatory struggle regarding the status of prediction markets in the United States.