Prediction market operator Kalshi must sharply curtail its operations in Washington state after a judge found the company is likely violating state gambling laws, escalating a legal battle over whether its event contracts are financial products or wagers.
King County Superior Court Judge John McHale ordered Kalshi to stop accepting contracts in Washington on sports, elections and politics, entertainment, culture, technology and science. The company can continue offering contracts linked to commodities, climate, economics and finance.
“Kalshi operates an online betting platform,” McHale wrote in his preliminary injunction, finding the company likely violates multiple provisions of Washington law.
Kalshi must implement an initial geofencing system by Aug. 19 and a more sophisticated system by Sept. 2 to prevent Washington users from placing restricted contracts. Failure to comply could result in fines of $120,000 a day, unless the company explains why the required system is not complete.
The judge also barred Kalshi from advertising and marketing restricted wagers to Washington consumers. The company must continue allowing residents to close their accounts and withdraw funds.
Washington Attorney General Nick Brown sued Kalshi in March, arguing that its prediction markets amount to gambling despite being structured as financial contracts.
McHale also cited concerns over gambling addiction in his ruling and found that Kalshi had “willfully ignored” guidance from the Washington State Gambling Commission stating that event-based contracts were not authorized in the state.
“Kalshi has gotten rich promoting wagers on sports, elections, natural disasters, events related to the Iran War, and more,” Brown said. “As this case moves forward, we will continue to enforce Washington law and hold Kalshi accountable for misleading consumers.”
Kalshi has appealed the injunction and said it is considering further legal action.
“The CFTC has exclusive jurisdiction over our exchange,” Kalshi spokesperson Jacki McGavick said. “We respectfully disagree with the court’s decision and are considering all legal options.”
The dispute is part of a broader legal fight between prediction market operators and state regulators. Kalshi faces challenges in several states, while the Commodity Futures Trading Commission has argued that federal law preempts state efforts to regulate such markets.
“Congress did not intend for derivatives exchanges to be regulated under a patchwork of state gaming laws,” CFTC Chair Michael S. Selig said. “These are financial exchanges that offer financial instruments and operate across state lines.”
The Washington case will continue toward trial. Brown is also seeking to recover money lost by Washington bettors on Kalshi and impose civil penalties.