Kalshi must limit operations in Washington state following a legal ruling that found the company likely violating state gambling laws. The ruling escalates the legal battle over whether its event contracts are financial products or wagers.
King County Superior Court Judge John McHale has ordered Kalshi to halt accepting contracts in Washington on sports, elections, politics, entertainment, culture, technology, and science. However, the company can continue offering contracts related to commodities, climate, economics, and finance.
McHale highlighted that Kalshi operates as an online betting platform and is likely in violation of several Washington state laws. The company must implement a geofencing system by Aug. 19 and further improve it by Sept. 2 to prevent Washington users from placing restricted contracts. Failure to comply could result in fines of $120,000 daily unless the required system is incomplete.
The judge also prohibited Kalshi from advertising and marketing restricted wagers to Washington consumers. The company is obliged to allow residents to close their accounts and withdraw funds.
Washington Attorney General Nick Brown initiated a lawsuit against Kalshi in March, arguing that its prediction markets constitute gambling despite being structured as financial contracts.
McHale also expressed concerns about gambling addiction in his ruling and noted that Kalshi had “willfully ignored” guidance from the Washington State Gambling Commission, stating that event-based contracts were not authorized in the state.
Brown stated, “Kalshi has profited from offering wagers on sports, elections, natural disasters, events related to the Iran War, and more.” The case will proceed to trial, with Brown seeking to recover lost funds by Washington bettors on Kalshi and impose civil penalties.
Kalshi has appealed the injunction and is exploring further legal actions.
The dispute is part of a larger legal battle between prediction market operators and state regulators. Kalshi faces challenges in multiple states, while the Commodity Futures Trading Commission argues that federal law supersedes state efforts to regulate such markets.
CFTC Chair Michael S. Selig emphasized, “Congress did not intend for derivatives exchanges to be subjected to a patchwork of state gaming laws.” These exchanges offer financial instruments and operate across state lines.
The Washington case will proceed to trial. Brown aims to hold Kalshi accountable for misleading consumers and violating Washington laws.