Arkansas is suing to shut down two of the most prominent companies offering what the state believes is illegal gambling within its borders.
On Wednesday, Atty. Gen. Tim Griffin sued both prediction markets operator Kalshi and VGW Holdings, the company behind sweepstakes brands like Global Poker and Chuba Casino. Both companies are violating the Arkansas Deceptive Trade Practices Act, Griffin said.
“Arkansas’s gambling laws are clear,” Griffin said. “If you’re providing a means for Arkansans to gamble money within our state, you are subject to the rules and regulations that govern legal gambling.”
Circumventing Arkansas law
Prediction markets say that their event contracts are different from traditional sports betting and simply allow for peer-to-peer trading with no sportsbook acting as the house. Users can enter and exit a market at any time and companies like Kalshi paint the exchanges as more akin to traditional financial markets.
Sweepstakes operators make use of a dual currency gaming system. This structure includes free-to-play gaming options using one currency. Users who purchase additional free-to-play currency are offered a secondary currency as a bonus.
The secondary currency can be used to play and accumulated to redeem for real cash or prizes. Several states, including California, New York, New Jersey, and Oklahoma, have banned the platforms, alleging they are nothing more than gambling platforms.
Sweeps operators argue that no one has to purchase anything to play and the industry favors regulation rather than prohibitions. Griffin said both Kalshi and VGW simply find a way to offer gambling veiled as another product.
“Arkansas law is concerned with substance, not semantics, and in Arkansas, gambling is regulated to protect consumers,” he said. “Although Kalshi insists its products are not gambling, its actions speak louder than its labels.”
AG targets RG tools on Kalshi
Both suits seek restitution, penalties, and taxes as well as seeking refunds for customers. The state is also pushing the court to prohibit Kalshi and VGW from operating in the state. Like with VGW, Griffin alleges Kalshi is engaging in illegal gambling in the state.
The attorney general got specific in laying out that case against the prediction market, pointing to how the platform offers tools like self-exclusion, deposit limits, trading breaks, and other features commonly associated with online gaming operators.
Griffin notes that the company also promotes gambling addiction resources, including a recent partnership with the National Council for Problem Gambling.
“Although Kalshi insists that its products are not gambling, its actions speak louder than its labels,” Griffin said. “Kalshi is not blind that its platform presents real, tangible risks to its users, including excessive wagering, financial losses, depression, and other mental health harms.”
Kalshi denies allowing users to engage in illegal gambling. The company argues that the platform simply matches traders with other traders.
“On Kalshi there is no house, anybody can win,” Kalshi co-founder and CEO Tarek Mansour told CNBC in December.
Despite that, prediction markets continue to challenge traditional sports betting market. The industry saw a record $123.3 billion in trading volume in October, surpassing $100 billion for the first time. According to data from Artemis, that was up 53.9% from the previous high set in September, with the number of trades reaching 642.9 million. Sports event contracts continue to be a massive part of that growth.
