Washington Court Halts Kalshi’s Sports Event Contracts, Denies Federal Preemption Claim

Court Grants Injunction Against Kalshi

A Washington state superior court has issued a preliminary injunction blocking predictive markets platform Kalshi from offering sports-related event contracts within the state. King County Superior Court Judge John McHale determined that the state is likely to succeed in its argument that these contracts violate Washington’s gambling laws. The ruling temporarily prohibits Kalshi from operating its sports betting-style products for Washington consumers.

Preemption Argument Rejected

Central to the case was Kalshi’s claim that the Commodity Exchange Act (CEA) preempts state gambling regulations, thereby removing its federally regulated event contracts from local oversight. Judge McHale explicitly rejected that position, writing that "the Commodity Exchange Act (CEA) does not preempt Washington State gambling law" and emphasizing that "regulation of gambling and regulation of futures markets are different fields of regulation." He added that Congress did not intend to supersede or limit states in regulating gambling.

The court further found that Kalshi likely engaged in illegal gambling, bookmaking, and professional gambling under Washington law. Additionally, the judge ruled that Kalshi’s marketing of its products as "legal betting" in Washington was likely misleading under the state’s Consumer Protection Act. In the order, McHale stated: "Kalshi offers illegal gambling activities to Washington consumers and solicits bets from Washington consumers on its platform."

Implementation and Industry Reaction

The injunction will not take effect until August 5, with the court ordering both parties to propose terms by August 3. The judge expressed hope that Kalshi "may provide insight into effective ways to protect Washingtonians as the State seeks to do."

A Kalshi spokesperson responded by disagreeing with the court’s interpretation, arguing that states lack jurisdiction over prediction markets. "Many courts - including the Third Circuit - have made this clear. We're disappointed to see Washington state continue wasting taxpayer dollars," the spokesperson said.

Broader Legal Landscape

Washington now joins Massachusetts, Nevada, and Michigan as states that have secured injunctions against Kalshi's sports contracts. Sports and gaming attorney Daniel Wallach noted that courts have issued 23 decisions on requests for preliminary injunctions or temporary restraining orders in prediction market cases, with states prevailing in 19 of them. "The tide is turning sharply in the states' favor," Wallach commented.

He added that while the issue may ultimately reach the U.S. Supreme Court, "Kalshi's map for sports-related contracts could look markedly different in six months than it did earlier this year when it was not the subject of any injunctions barring it from offering sports contracts."

Separately, the Commodity Futures Trading Commission has filed a lawsuit against New York seeking a declaratory judgment that federal law grants it exclusive authority over event contracts, underscoring the ongoing jurisdictional battle over prediction market regulation.