Arkansas’ Attorney General issued a formal opinion on prediction markets on Thursday determining that operators such as Kalshi that offer sports contracts are engaging in illegal gambling if they do not have a sports betting license.
Sen. Bryan King asked state AG Tim Griffin to provide clarity on prediction markets’ event contracts on things such as sports and elections in August. King worked on the letter with the request alongside state Senate Chief Legal Counsel Phillip Treat.
The AG’s office took less than three months to issue the opinion.
“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,” wrote Griffin in a formal opinion prepared by Assistant AG William Olson and published on Oct. 23.
‘Rebranding’ be damned
“The fact that a company has rebranded this gambling activity as a ‘prediction market’ does not protect it from scrutiny,” continued Griffin.
“Further, it is unlawful for anyone to ‘receive or transmit information’ concerning sports or games ‘for the purpose of gaming.’ Thus, to the extent that a company like Kalshi facilitates wagers on sports outcomes or transmits data for gaming purposes (and your correspondence suggests that it does), those actions violate the law as well.
“Based on the information provided in the opinion request, a business model like you have described constitutes gambling or gaming and requires licensure.”
“This concludes what I and other gaming professionals see: that prediction markets are gambling,” Sen. King told SBC Americas on Thursday. “They should follow the same rules as traditional gambling institutions.”
Kalshi operating where FanDuel, DraftKings are not
Arkansas has allowed licensed sportsbooks to offer online wagering since 2022 via partnerships with state casinos. None of the U.S. market leaders such as FanDuel or DraftKings operate there, and the only licensed online sportsbooks are Betly, Bet Saracen and Oaklawn Sports. The Arkansas Racing Commission taxes those operators at 13% on the first $150 million in revenue and 20% thereafter.
But Kalshi, which was named numerous times in King’s letter and the AG office opinion, offers a range of sports trading across the U.S., including both in states like Arkansas with limited sports betting markets and many states that have not legalized sports wagering at all.
Arkansas also allows online fantasy sportsat an 8% tax rate. King asked Griffin whether sports-related event contract providers would be subject to that tax; the AG said they would not.
Could legislative action follow?
Like California AG Rob Bonta’s office’s high-profile negative opinion on DFS this summer, Griffin’s office’s letter is just an opinion, not a legislative or regulatory action. Several states have attempted enforcement against prediction markets including Kalshi and Crypto.com this year through measures such as cease-and-desist letters as the operators have expanded their sports offerings.
Meanwhile, other Arkansas lawmakers have shown willingness to tackle their state’s gaming market through legislation this year, such as a pair of short-lived bills that would have banned sweepstakes gaming while legalizing online casino. SBC Americas asked King if he would look to follow up on the AG office’s opinion with further action. “I will be following up on the next steps in the weeks to come,” said the senator.
Arkansas AG Griffin was one of the 34 state AGs who signed an amicus brief filed in June in Kalshi’s legal case in New Jersey court, arguing that letting the Commodity Futures Trading Commission’s (CFTC) federal regulation of derivatives supersede state gambling regulations could have huge ramifications. He was also one of the 50 AGs who implored the Department of Justice in August to take a harder stance against unapproved gambling across the country.
