The Superior Court of Washington has issued a preliminary injunction against Kalshi, a platform for prediction markets. This action temporarily prevents the company from offering contracts related to sports events in Washington State, as the court believes the state will likely prevail in its argument that these contracts violate local gambling legislation.
Judge John McHale of King County Superior Court declared that the Commodity Exchange Act (CEA) does not supersede Washington’s gambling regulations, rejecting Kalshi’s claims that its federally regulated event contracts fall outside the authority of state regulators.
The court determined that Kalshi is likely engaged in illegal gambling activities, bookmaking, and professional gambling according to Washington law, stating that its marketing materials, which refer to products as “legal betting” in Washington, could potentially mislead consumers under the state’s Consumer Protection Act.
“Kalshi provides illegal gambling services to consumers in Washington and actively seeks wagers from these consumers on its platform,” wrote McHale in the ruling.
The judge concluded that the public interest weighs in favor of the injunction, noting that “the public concerns at issue and the potential harm to consumers from the continued operation of Kalshi’s online gambling in Washington outweighs any detriment to Kalshi.”
The injunction’s enforcement will not begin until after August 5. The court has instructed both parties to submit proposed terms by August 3 while expressing hope that Kalshi could offer suggestions on effective consumer protections as Washington State investigates.
McHale dismissed Kalshi’s primary legal argument, clarifying that “the Commodity Exchange Act (CEA) does not override Washington State’s gambling laws” and asserting that “gambling regulation and futures market regulation are distinct areas of law.” He stressed that Congress did not intend to restrict states in their gambling regulatory efforts.
In reaction to the ruling, a spokesperson for Kalshi expressed disagreement with the court’s interpretation.
“States lack jurisdiction to regulate prediction markets, as affirmed by multiple courts including the Third Circuit. We feel disappointed that Washington State continues to expend taxpayer resources,” the representative stated.
This ruling adds to Kalshi’s list of legal challenges as it struggles with state regulators over whether its contracts for sports events are solely under federal commodities law or also fall under state gambling regulations.
Washington now joins a growing list of states, including Massachusetts, Nevada, and Michigan, that have obtained injunctions against Kalshi’s sports-event contracts.
Daniel Wallach, a legal expert in sports and gaming, informed The Block that courts have now issued 23 rulings on requests for preliminary injunctions or temporary restraining orders in prediction market cases, with states winning in 19 instances.
“The trend is decidedly turning towards state regulators,” Wallach remarked.
He also noted the likelihood that the issue could eventually reach the U.S. Supreme Court, stating “the landscape for Kalshi’s sports-related contracts may look significantly different in six months compared to earlier this year, when it faced no injunctions preventing it from offering these contracts.”
Additionally, the Commodity Futures Trading Commission has filed a lawsuit against New York, seeking a declaratory judgment to affirm that federal law grants it exclusive authority over event contracts, demonstrating the larger legal conflict regarding the regulation of prediction markets.