A Washington state judge has ordered Kalshi to halt most event contract offerings in the state, citing likely violations of gambling law and requiring new geofencing measures as the legal dispute over prediction markets continues
Kalshi, a federally regulated prediction market operator, has been ordered by a Washington state court to sharply limit its event contract offerings within the state. The preliminary injunction, issued by King County Superior Court Judge John McHale, found that Kalshi is likely in violation of Washington's gambling laws and must immediately stop accepting contracts on a wide range of topics for Washington-based users.
Scope of the Court Order
The court's order prohibits Kalshi from offering event contracts in Washington related to sports, elections and politics, entertainment, culture, technology, and science. However, Kalshi may continue to offer contracts tied to commodities, climate, economics, and finance. The ruling requires Kalshi to implement an initial geofencing system by August 19, with a more advanced system due by September 2, to prevent Washington residents from accessing restricted contracts. Noncompliance could result in fines of $120,000 per day unless the company demonstrates why the required systems are not in place. Kalshi is also barred from advertising or marketing restricted contracts to Washington consumers and must allow residents to close accounts and withdraw funds.
Legal Arguments and Regulatory Tension
The legal dispute centers on whether Kalshi's event contracts should be classified as financial products regulated by the Commodity Futures Trading Commission (CFTC) or as wagers subject to state gambling laws. Washington Attorney General Nick Brown filed suit against Kalshi in March, arguing that the company's prediction markets constitute illegal gambling under state law, regardless of their federal regulatory status. Judge McHale's order cited concerns about gambling addiction and noted that Kalshi had disregarded guidance from the Washington State Gambling Commission, which previously stated that event-based contracts are not authorized in the state.
Operator Response and Federal-State Conflict
Kalshi has appealed the injunction and is considering further legal action, maintaining that the CFTC has exclusive jurisdiction over its exchange. The company argues that federal law preempts state regulation of designated contract markets, a position echoed by CFTC Chair Michael S. Selig, who has stated that Congress did not intend for derivatives exchanges to be governed by a patchwork of state gaming laws. The case highlights ongoing friction between state regulators and federally regulated prediction market platforms, with similar disputes emerging in other states.
What Happens Next
The Washington case is set to proceed toward trial, with the Attorney General seeking to recover losses for Washington bettors and impose civil penalties. For now, Kalshi must comply with the court's restrictions or face significant daily fines. The outcome could influence how prediction markets are regulated across the U.S., especially as more states and federal agencies clarify their positions on event contracts and online wagering platforms.
Event contracts, as offered by platforms like Kalshi, allow users to buy and sell positions on the outcome of future events, ranging from elections to economic indicators. While the CFTC treats these as financial instruments when offered by designated contract markets, many states—including Washington—view them as wagers subject to gambling law. The distinction is central to ongoing legal and regulatory debates, as it determines which agencies have authority and what consumer protections apply.
