Washington court issues injunction against Kalshi

A Washington state court has granted a preliminary injunction in the state’s lawsuit against Kalshi, ruling that Washington is likely to succeed in its claims that the prediction market platform violates state gambling laws. The decision was issued by King County Superior Court Judge John McHale, with the court set to establish the specific terms of the injunction on August 5.

The case was filed in March by Washington Attorney General Nick Brown, whose office alleges that Kalshi’s event-based contracts violate the Washington Gambling Act and the Consumer Protection Act. The lawsuit seeks to halt Kalshi’s operations in the state and recover money lost by Washington residents.

The ruling addresses whether Kalshi’s event contracts can be offered in Washington under the state’s gambling regulations.

Kalshi operates a platform where users trade contracts linked to the outcomes of real-world events, including sports, elections and other events. The company argues that its products are part of a federally regulated prediction market and that states do not have authority to regulate them as gambling activities.

Judge McHale rejected Kalshi’s argument that the Commodity Exchange Act prevents Washington from applying its gambling laws. The court found that regulation of gambling and regulation of futures markets are separate areas and determined that compliance with Washington law would not prevent Kalshi from meeting federal requirements.

The ruling also referenced a Kalshi advertisement showing a text exchange between two users, including the statement: “I found a way to bet on the NFL even though we live in Washington.” The court noted that Kalshi continued offering event-based contracts after receiving notice from the Washington State Gambling Commission stating that such products were not authorized in the state.

Kalshi said the company was disappointed with the ruling and argued that states do not have jurisdiction to regulate prediction markets. 

In a statement responding to the preliminary injunction, a Kalshi spokesperson said the company was disappointed with the ruling and argued that previous court decisions, including a ruling from the U.S. Court of Appeals for the Third Circuit, support its position that state authorities do not have jurisdiction over prediction markets.

Washington’s case follows legal challenges involving Kalshi in several other U.S. jurisdictions. Courts and regulators in states including Nevada, Massachusetts, New York, Michigan, Connecticut, Arizona, Illinois, Tennessee and Ohio have also been involved in proceedings concerning Kalshi’s operations.

Courts in different jurisdictions have issued rulings involving Kalshi as legal disputes over state gambling laws and prediction markets continue.