Washington Court Grants Preliminary Injunction Against Kalshi and Rejects Federal Preemption Arguments
Key Takeaways
- Preliminary Injunction Issued: Washington court blocks Kalshi from offering event contracts ruled as illegal gambling under state law.
- CEA Preemption Rejected: Federal commodities law does not override Washington gambling statutes according to the order.
- Fourth State Victory: Joins Massachusetts, Nevada and Michigan with states prevailing in 19 of 23 similar decisions.
- Upcoming Deadlines: Parties must submit proposed injunction terms by Aug. 3 with final order expected by Aug. 5.
A Washington state judge has granted a preliminary injunction against Kalshi. The court found the state is likely to succeed on claims that the prediction market operator’s sports event contracts violate Washington gambling laws.
The order rejects Kalshi’s argument that the Commodity Exchange Act preempts state enforcement. Excerpts first shared by gambling attorney Daniel Wallach on X show the court repeatedly characterized Kalshi’s offerings as illegal gambling.
Gambling Insider reported the decision which was also covered by DeFi Rate and sigma.world. The ruling adds to a pattern of state level pushback against federally regulated prediction markets.
Court Finds Likelihood of Success on Multiple Gambling Claims
The court determined Washington is likely to succeed on claims under the RMLGA and RCW 4.24.070. It found Kalshi operates develops manages finances and or profits from illegal gambling activities in the state.
The order states Kalshi engaged and continues to engage in professional gambling including by engaging in bookmaking. Kalshi transacts business in King County by offering operating conducting marketing promoting and or distributing unlicensed and illegal gambling activities including without limitation illegal gambling games bookmaking and professional gambling with respect to betting on sports elections politics entertainment culture and mentions markets.
Kalshi knowingly accepts and receives money from Washington consumers through its online betting platform. By facilitating wagers and collecting fees Kalshi profits from its betting platform.
The judge also concluded that Kalshi’s advertisements claiming legal betting in Washington state are likely to mislead a reasonable consumer that such gambling activities are legal under state law.
Federal Preemption Defense Fails to Hold
The court rejected Kalshi’s core argument that the CEA preempts state gambling laws. The order states the Commodity Exchange Act does not preempt Washington State gambling law.
Complying with Washington law would not prevent Kalshi from complying with federal laws. Allowing the state to enforce its gambling laws does not subvert the purpose of the CEA to uniformly regulate actual futures trading.
Regulation of gambling and regulation of futures markets are different fields of regulation. Congress did not intend for federal commodities law to displace state gambling regulation.
The judge noted CFTC Rule 40.11 which prohibits contracts involving gaming or activities unlawful under state or federal law. This distinction proved central to dismissing the preemption claim.
Public Interest Outweighs Compliance Costs and Lost Profits
The court found Washington had established irreparable harm if Kalshi continued to operate during litigation. It acknowledged Kalshi’s evidence regarding compliance costs and lost profits.
The judge concluded that the public interests at stake and potential harm to consumers in the continued operation of Kalshi’s online gambling activities in the State of Washington outweigh harm to Kalshi. This finding aligns with similar reasoning in other state cases.
From the supplier side these cost arguments surface repeatedly yet courts continue to prioritize consumer protection and state enforcement. The pattern suggests operators should model higher compliance overhead in their planning.
Precedent Grows With Actions in Four States
Washington becomes the fourth state to obtain a preliminary injunction against Kalshi after Massachusetts Nevada and Michigan. Courts have now issued 23 decisions on requests for preliminary injunctions or temporary restraining orders in prediction market cases with states prevailing in 19 of them.
Massachusetts secured an injunction against Kalshi’s sports event contracts at the beginning of the year. The operator later obtained a stay pending its appeal.
Nevada successfully obtained an injunction ordering Kalshi to stop offering contracts for sports entertainment and election events. Last month the Nevada Gaming Control Board asked a state court to hold Kalshi in contempt arguing noncompliance with the order.
Michigan extended a previously issued temporary restraining order. The court gave the operator until Aug. 12 to implement geofencing technology or face a $500,000-per-day fine.
In Washington the court reserved the injunction’s specific terms for a later order. The judge directed the parties to meet and confer on the scope and language of the injunction with proposed terms due Aug. 3. The court intends to enter a final order setting out the specific requirements of the injunction by Aug. 5.
The combined coverage from Gambling Insider DeFi Rate and sigma.world documents these state wins in detail. What remains underemphasized is the cumulative operational drag on platforms that must now maintain separate compliance logic across an expanding list of jurisdictions.
In my experience with platform integrations this fragmentation raises the engineering bar for real time market access controls. Operators cannot treat CFTC approval as a blanket defense.
What This Means for Operators
Prediction market platforms and their sports tech partners face a clear signal to de risk assumptions about federal preemption. With four injunctions now in place and 19 state wins out of 23 decisions the regulatory patchwork is hardening.
Geofencing deadlines like Michigan’s Aug. 12 cutoff and daily fines of $500,000 show the enforcement teeth. Operators should audit current offerings in restricted states and accelerate jurisdiction specific controls ahead of events that drive volume.
Investors evaluating these platforms need to weigh slower geographic rollout and higher legal overhead against revenue projections. The Washington order reinforces that state gambling statutes retain full force regardless of CFTC registration.
This reality favors teams with strong compliance infrastructure. Those without it will spend the next cycle catching up rather than scaling.
