As prediction markets continue to soar in valuation and to engage new audiences across the United States, more regulators and Attorney Generals have been joining the opposition.
The latest AG office to have done as much is Arkansas’ Tim Griffin, who recently responded to a letter by Sen. Bryan King, seeking the AG’s opinion on whether prediction markets were legal under state laws.
Question over Kalshi’s status as a prediction market company raised in Arkansas
In a letter, AG Griffin outlined his opinion, which echoed that of his colleagues in Massachusetts, who have recently gone after the sector as well. Answering whether a company "like Kalshi" would be breaking the law by operating in Arkansas, AG Griffin responded:
"Yes, based on the information provided in the opinion request, a business model like you have described constitutes gambling or gaming and requires licensure."
This response rendered moot another question, and namely: "If companies like Kalshi are not required to possess gaming licenses, would they be subject to any other Arkansas regulatory body as a financial exchange?" as well as another question that asked whether Kalshi could offer the equivalent of "election contracts" or "future tragedies."
AG Griffin believes that the current interpretation of "gambling" and "gaming" brings companies such as Kalshi within the state’s remit to regulate such entities. However, gambling is prohibited in Arkansas, and the Arkansas Supreme Court defines it as " the risking of money between two or more persons, on a contest or chance of any kind where one must be a loser and the other a gainer."
AG Griffin also specifies that while the words "gambling" and "gaming" are not defined by statute, judges are inclined to interpret them liberally in favor of the prohibition lest a company or someone else find a way around the law.
"Rebranding" does not shield prediction markets from scrutiny
"The acts you describe meet the Supreme Court’s definition of gambling and gaming: a participant is risking money on a chance that some future event occurs. The fact that a company has rebranded this gambling activity as a "prediction market" does not protect it from scrutiny. Further, it is unlawful for anyone to "receive or transmit information" concerning sports or games "for the purpose of gaming," the attorney general specifies in his opinion.
However, the AG’s opinion is hardly enough to oust Kalshi or any other prediction market platform from a jurisdiction. Kalshi has, for example, been fighting legal battles in several states, and winning in some.
Most recently, Kalshi filed a lawsuit against the New York gambling regulator, challenging its attempt to oust the platform from the Empire State.
