Washington Judge Blocks Kalshi Sports Contracts Under State Gambling Law

SEATTLE: A Washington judge granted the state a preliminary injunction against Kalshi over its sports event contracts. The ruling strengthens state efforts to apply gambling laws to federally regulated prediction markets.

King County Superior Court Judge John McHale granted Washington’s motion Monday after finding that Kalshi likely violated the Washington Gambling Act and Consumer Protection Act. The court has not yet issued the injunction’s final operating terms, which are expected by August 5.

Judge Rejects Federal Preemption Argument

McHale found that Kalshi offers illegal gambling activities to Washington consumers and solicits bets from residents through its platform. He said the state had demonstrated “a likelihood of actual and substantial injury to Washington consumers from illegal gambling activities” without court intervention.

The judge also found that the public interest and potential consumer harm outweighed the damage an injunction could cause Kalshi. According to the Washington Attorney General’s announcement, the decision represents an early court victory rather than a final judgment in the underlying lawsuit.

The dispute centers on whether the federal Commodity Exchange Act prevents states from enforcing gambling laws against contracts listed on exchanges overseen by the Commodity Futures Trading Commission. McHale rejected Kalshi’s argument that federal law preempts Washington’s gambling rules.

Kalshi disputed the decision and maintained that states lack authority over federally regulated prediction markets. “States don’t have jurisdiction to regulate prediction markets,” the company said. “We’re disappointed to see Washington state continue wasting taxpayer dollars.”

State Wins Add Pressure on Kalshi

Washington filed its case in March, alleging that Kalshi operated an illegal sports betting platform while presenting its products as financial contracts. The state also accused the company of offering markets resembling conventional sportsbook wagers without complying with Washington’s gambling restrictions.

The latest order marks a significant development in Washington’s lawsuit against Kalshi. State officials are seeking to stop the company’s activities, recover consumer losses and secure civil penalties under state law.

Washington joins Massachusetts, Michigan and Nevada in obtaining court orders restricting Kalshi’s activities. A federal judge also recently rejected Kalshi’s attempt to block New York enforcement, allowing that state to continue applying its gambling laws to the platform.

The legal picture remains divided. In April, the U.S. Court of Appeals for the Third Circuit upheld an injunction preventing New Jersey gaming authorities from regulating Kalshi’s sports event contracts, finding that the company was likely to succeed on its federal preemption claim.

Final Injunction Terms Due by August 5

The Washington court directed Kalshi and the state to discuss the injunction’s scope and submit agreed or competing proposals by August 3. The restrictions will not take effect before August 5, when the court intends to issue an order setting out the specific requirements.

The CFTC has continued to claim exclusive federal jurisdiction over prediction markets and has challenged regulatory action in several states. The conflicting decisions leave the division between federal commodities oversight and state gambling authority unresolved as the Washington case proceeds.

RELATED TOPICS: Regulation