A Washington state judge has ordered prediction market operator Kalshi to significantly reduce its activities in the state, marking another setback for the company as legal disputes over event-based wagering continue to spread across the United States.
King County Superior Court Judge John McHale ruled that Kalshi is likely violating Washington’s gambling laws and directed the company to stop offering a wide range of contracts to people located within the state. The order requires the company to introduce geofencing measures that prevent Washington residents from accessing many of its markets.
Under the ruling, Kalshi must establish an initial geofencing system by Aug. 19 and implement a more comprehensive version by Sept. 2. The order requires both IP-address and residency-based restrictions, followed by a multi-source geofencing system. If the company fails to meet the Sept. 2 deadline, it could face daily penalties of $120,000 unless it demonstrates sufficient progress to the court.
The decision follows a lawsuit filed in March by Washington Attorney General Nick Brown, whose office argues that Kalshi’s prediction markets function as gambling under state law. The case focuses on Washington’s longstanding restrictions on online gambling, which generally prohibit such activity except for limited forms of sports wagering conducted on tribal lands and in person at tribal casinos.
Court Expands Restrictions on Prediction Market Activity
McHale’s order bars Kalshi from offering, accepting or facilitating wagers tied to sports, elections, politics, entertainment, culture, technology and science. The ruling also covers so-called “mentions” contracts, which allow users to wager on whether public figures will say particular words during speeches or public appearances.
Contracts tied to commodities, climate, economics and finance may continue to be offered under the court order.
The judge also prohibited Kalshi from advertising restricted contracts to consumers in Washington. Court filings cited marketing materials that allegedly encouraged Washington residents to participate despite state gambling restrictions. One advertisement referenced in the case showed a text message stating, “I found a way to bet on the NFL even though we live in Washington.”
Brown welcomed the ruling and said enforcement efforts would continue as the litigation proceeds.
“Kalshi has gotten rich promoting wagers on sports, elections, natural disasters, events related to the Iran War, and more,” the Attorney General said in a statement cited by Washington State Standard. “As this case moves forward, we will continue to enforce Washington law and hold Kalshi accountable for misleading consumers.”
The attorney general’s office has also sought to recover money lost by Washington bettors on the platform and pursue civil penalties.
State and Federal Authorities Continue Jurisdiction Dispute
Kalshi maintains that its exchange falls under federal oversight rather than state gambling regulation. The company has repeatedly argued that the Commodity Futures Trading Commission (CFTC) has exclusive authority over its operations.
A company spokesperson responded to the latest ruling by stating, “We respectfully disagree with the court’s decision and are considering all legal options.”
The broader legal fight reflects an ongoing disagreement between states and federal regulators over the status of prediction markets. Washington argues that users stake money on uncertain future events, bringing the activity within the state’s definition of gambling. The CFTC has taken the position that such contracts are financial products traded on federally regulated exchanges.
The federal regulator recently directed Kalshi to continue operating in accordance with the Commodity Exchange Act after the company faced legal action in New York. CFTC Chair Michael S. Selig defended the agency’s position earlier this week, stating, “Congress did not intend for derivatives exchanges to be regulated under a patchwork of state gaming laws. These are financial exchanges that offer financial instruments and operate across state lines.”
The agency has also filed lawsuits against multiple states that have sought to block prediction market activity, arguing that federal law overrides state-level restrictions.
Growing Legal Pressure Across Multiple States
Washington joins a growing list of jurisdictions challenging prediction market operators. Kalshi and competitor Polymarket have attracted substantial trading activity by allowing users to speculate on outcomes ranging from sporting events and elections to entertainment contests and economic developments.
The expansion of these platforms has prompted scrutiny from regulators and lawmakers in states with restrictive gambling laws. New York’s attorney general recently sued Kalshi, alleging that the company is operating unlawfully. Minnesota enacted legislation banning such applications earlier this year, although that measure has been temporarily halted by a judge.
Nevada became the first state in July to require Kalshi to restrict access to sports, election and entertainment-related contracts.
Judge McHale’s latest order builds on an earlier injunction issued in July, when he concluded that Kalshi likely violated Washington’s Gambling Act and Consumer Protection Act. The Washington Court of Appeals subsequently rejected the company’s request to pause that injunction.
In his reasoning, McHale also referenced concerns about gambling-related harm. Court documents cited a 2021 Washington study that found online gamblers were considerably more likely to experience moderate to severe gambling problems than individuals who wagered only at physical gambling venues.
The legal battle is expected to continue as Washington pursues its case while Kalshi weighs further options for challenging the state’s restrictions.