A Washington state judge has barred prediction markets platform Kalshi from offering its event contracts in the state after finding the company likely violated gambling laws, a ruling that adds to a growing patchwork of state-level crackdowns on the fast-growing industry.
King County Superior Court Judge John McHale granted the state's request for a preliminary injunction on Monday, siding with Washington Attorney General Nick Brown's argument that Kalshi's contracts amount to illegal gambling under state law. McHale found that Washington demonstrated "a likelihood of actual and substantial injury to Washington consumers from illegal gambling activities" if the platform continued operating unchecked, the New York Post reported.
The judge concluded that the public interest and potential consumer harm outweighed any harm to Kalshi from the injunction. He plans to issue a formal order implementing the block on August 5.
Attorney General Brown did not hold back in his statement following the ruling. He accused Kalshi of cashing in on contracts that let users wager on everything from sports outcomes and elections to measles case counts, witness testimony in a child trafficking hearing, and natural disasters.
"Kalshi padded their pockets as they promoted illegal betting on sports, elections, the total number of measles cases this year, what will witnesses say during a child trafficking hearing, and even natural disasters. This victory is the first step toward holding Kalshi accountable."
That list of contract subjects tells its own story. Whatever the merits of betting on, say, an election outcome, a market that lets users wager on what a witness will say during a child trafficking proceeding raises questions that go well beyond ordinary financial regulation. When a state attorney general can stand in court and recite that catalog of offerings, the platform has a public-relations problem that no legal brief will fix.
Kalshi pushed back on Tuesday, insisting that states lack the authority to regulate prediction markets at all. "States don't have jurisdiction to regulate prediction markets," the company said in a statement. "We're disappointed to see Washington state continue wasting taxpayer dollars."
That argument, that federal law preempts state gambling statutes, has become the industry's go-to defense. And it has worked in at least one courtroom. In April, a divided federal appeals court blocked New Jersey gaming authorities from regulating Kalshi's sports event contracts, citing the authority of the U.S. Commodity Futures Trading Commission. The CFTC has claimed exclusive jurisdiction over the prediction markets industry and challenged regulatory activity in at least nine states.
Washington is the latest in a string of states that have secured court orders restricting Kalshi's operations. Massachusetts, Michigan, and Nevada previously won similar orders. On July 8, a federal judge in New York rejected Kalshi's bid to block enforcement of that state's gambling laws against the platform.
But the legal landscape is fractured. While those five states have pushed back successfully, the New Jersey appeals court ruling in April cut the other way, finding that federal commodity law likely preempts state gambling regulation. In Arizona, U.S. District Judge Michael Liburdi went further, temporarily barring the state from enforcing its gambling laws against prediction market operators and pausing criminal proceedings against Kalshi. Arizona had filed 20 misdemeanor counts against the company for allegedly accepting bets on political outcomes, college sports, and individual player performance.
CFTC Chairman Michael Selig framed Arizona's prosecution as government overreach, saying, "Arizona's decision to weaponize state criminal law against companies that comply with federal law sets a dangerous precedent." Arizona's attorney general disagreed, with spokesperson Richie Taylor saying the office "disagrees with the court's ruling and we will evaluate our next steps."
The result is a jurisdictional tangle that leaves consumers, regulators, and the platforms themselves operating under contradictory rules depending on which state line they happen to cross. Washington's ruling deepens that confusion rather than resolving it.
The legal battles are playing out against a backdrop of explosive growth. Approximately $19.04 billion was wagered through Kalshi and fellow prediction market Polymarket on the recently completed soccer World Cup alone, according to data tracker Dune Analytics. Prediction markets also drew national attention after outperforming traditional pollsters in predicting Donald Trump's victory over Kamala Harris in the 2024 presidential election, a result that turbocharged the industry's popularity and its political clout.
That surge in volume has brought scrutiny from multiple directions. Major Wall Street firms have already begun tightening their own internal rules, with Goldman Sachs and Morgan Stanley restricting employee bets on prediction markets to guard against conflicts of interest.
The CFTC's position, that prediction market contracts qualify as federally regulated "swaps" under the Commodity Exchange Act, giving Washington exclusive federal jurisdiction, has found traction in some courts. But Judge McHale in Washington state was unpersuaded. His ruling treats Kalshi's event contracts as gambling products subject to state consumer-protection authority, not as sophisticated financial instruments shielded by federal preemption.
That distinction matters. If prediction markets are swaps, the CFTC regulates them and states must stand down. If they are gambling, states retain the power to ban them outright. The answer may ultimately depend on which contracts are at issue, a bet on the Federal Reserve's next interest rate decision looks different from a wager on measles case counts or witness testimony in a criminal proceeding.
Concerns about information asymmetry and insider advantage in fast-moving financial markets have only added fuel to regulators' arguments that the industry needs tighter oversight, whether at the state or federal level.
Kalshi's core legal strategy rests on a simple claim: federal law occupies the field, and states cannot touch prediction markets. The company has said so plainly, and the CFTC under the Trump administration has backed that position aggressively, filing suits in multiple states.
But the Washington ruling exposes a weakness in that strategy. Judge McHale weighed the competing interests and found that consumer protection won. The state's catalog of Kalshi's contract offerings, sports, elections, disease outbreaks, natural disasters, and testimony in a child trafficking case, gave the court a concrete basis for concluding that real harm to real people was at stake. The judge did not treat the question as an abstract turf dispute between federal and state regulators. He treated it as a consumer-protection case.
The formal implementing order set for August 5 will determine the precise scope of the injunction. It remains unclear whether the block covers all event contracts or only specific categories. Kalshi has not publicly stated whether it will appeal, though its combative statement suggests the fight is far from over.
The broader gambling landscape continues to shift rapidly. From NCAA gambling probes to prediction market insider trading scandals, regulators at every level are scrambling to keep pace with an industry that has outgrown the rules written for it.
When a company's product menu includes bets on what a witness will say at a child trafficking hearing, the question is no longer whether regulators should act, it is why it took this long.