A preliminary injunction against Kalshi was granted by a judge in Washington state on Monday, marking a significant victory for state regulators against the prediction market platform. Judge John McHale of King County Superior Court issued the ruling, stating that Kalshi functions as an online betting platform and misrepresents its services to consumers by labeling them as "legal betting." The judge also concluded that Kalshi’s sports event contracts fall outside the Commodity Exchange Act (CEA) and are not under the jurisdiction of the Commodity Futures Trading Commission (CFTC), despite the company's assertions to the contrary.
The injunction will be on hold until at least August 5, as the court will review additional submissions from both parties before establishing the specific details of the injunction.
This ruling followed a legal battle initiated by Washington Attorney General Nick Brown, who filed a lawsuit against Kalshi in late March, alleging violations of the state’s Gambling Act and Consumer Protection Act. Brown argued that Kalshi's offerings essentially constitute illegal sports betting. He requested that the court order Kalshi to cease its operations within Washington, impose civil penalties, and recover lost funds for Washington residents from what he termed an illegal gambling operation.
Kalshi has referred to itself as a "prediction market" in an effort to sidestep state regulations. Attorney General Brown criticized this move, asserting, "Slapping ‘prediction market’ on sports betting doesn’t change what it is – it’s gambling, just without the rules and protections Washington requires." Currently, Washington only permits state-regulated sports wagering through in-person betting at tribal casinos.
Rebecca George, the Executive Director of the Washington Indian Gaming Association (WIGA), echoed these sentiments, stating that Kalshi's activities infringe on both state law and tribal sovereignty. She emphasized that labeling their operations as a prediction market does not alter the legality of the gambling practices involved.
Kalshi sought to transfer the lawsuit to federal court, but the judge ruled in favor of keeping it at the state level, contending that gambling regulation is primarily a matter for state authorities.
Judge McHale indicated that Washington has strong grounds for success on several fronts, noting, "Congress did not intend to supersede or limit States in regulating gambling…" He highlighted that gambling regulation and futures market regulation operate in distinct legal domains. Furthermore, he pointed out that allowing Kalshi to continue operations during the ongoing litigation could cause irreparable harm to the state and its consumers, outweighing potential harm to the company from a temporary shutdown.
Following the ruling, Kalshi representatives expressed their objection, arguing that states lack authority to regulate prediction markets. Spokesperson Jacki McGavick commented on social media, "Many courts — including the Third Circuit — have made this clear. We’re disappointed to see Washington State continue wasting taxpayer dollars."
Washington now joins three other states — Massachusetts, Michigan, and Nevada — that have secured preliminary injunctions against Kalshi. Michigan recently obtained similar relief, yet the CFTC has instructed Kalshi to disregard a court order that mandated the voiding of all outstanding trades for sports contracts in the state by August 12. Overall, there have been 19 favorable judicial outcomes for states out of 23 cases concerning preliminary injunctions related to prediction markets, according to gaming attorney Daniel Wallach. Kalshi also faced a setback this month when a federal judge dismissed its request for a preliminary injunction against the New York State Gaming Commission.
