Judge Grants Washington’s Injunction Against Kalshi

SEATTLE — A King County Superior Court judge has granted Washington state’s request for a preliminary injunction against KalshiEX, finding the company likely violated state gambling and consumer protection laws through its online betting platform.

Judge John McHale ruled that Kalshi operates an unlicensed gambling platform that allows Washington users to wager on sports, elections, entertainment and other future events. The court also found that federal commodities law does not prevent Washington from enforcing its gambling laws.

“This victory is the first step toward holding Kalshi accountable for their brazen violations of Washington law. 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.”

Washington Attorney General Nick Brown

Judge Rejects Kalshi’s Federal Preemption Argument

Kalshi describes its service as a federally regulated prediction market rather than a gambling operation. Users purchase “yes” or “no” contracts tied to the outcome of future events.

If a user predicts the outcome correctly, the contract produces a payout. An incorrect prediction costs the user the money placed on the contract. Kalshi collects transaction fees.

The company argued that the federal Commodity Exchange Act and oversight by the Commodity Futures Trading Commission preempt Washington’s gambling laws.

However, McHale rejected that argument. He found that federal law regulates futures markets but does not eliminate the state’s authority to regulate activities that qualify as gambling under Washington law.

“Regulation of gambling and regulation of futures markets are different fields of regulation,” McHale wrote.

The judge also found that following Washington law would not prevent Kalshi from complying with federal requirements.

Kalshi Marketed Betting to Washington Residents

Kalshi offers contracts involving sports, politics, elections, entertainment, culture and words that public figures may use during appearances. Its website and mobile app have remained accessible to Washington users.

According to the order, Kalshi specifically targeted Washington residents through its advertising. One advertisement told users they had “found a way to bet on the NFL even though we live in Washington.”

McHale found that advertisements describing Kalshi as “legal betting” in Washington would likely mislead a reasonable consumer.

“Kalshi’s provision, marketing, and advertising of illegal gambling activities constitute unfair and/or deceptive acts or practices,” the judge concluded.

The Washington State Gambling Commission warned in December that offering or participating in event-based contracts was not authorized in the state. Nevertheless, the court found that Kalshi continued offering those contracts.

Kalshi does not hold a license from the Washington State Gambling Commission. The company also has not registered to conduct business in Washington, according to the order.

Court Finds Potential Harm to Consumers

To secure the preliminary injunction, the Attorney General’s Office needed to establish that the state would likely prevail as the lawsuit moves forward. It also had to demonstrate that Washington consumers faced a likelihood of substantial harm without court intervention.

McHale found that the state met both requirements.

The judge considered Kalshi’s potential compliance costs and lost profits. However, he ruled that the public interest and potential harm to Washington consumers outweighed the financial harm to the company.

The order cites a 2021 state study that found moderate-to-severe problem gambling occurred more frequently among online gamblers than among people who gambled only at physical locations.

Washington generally prohibits internet gambling. State law allows a limited exception for sports wagering on tribal lands under approved gaming compacts.

Final Injunction Terms Expected Aug. 5

The court immediately ordered Kalshi to preserve records connected to Washington consumers. Those records include contracts, account logs, communications, location information and advertising data.

However, the judge has not yet established all restrictions that Kalshi must follow.

Attorneys for Kalshi and the state have until noon Aug. 3 to submit proposed terms and additional arguments. McHale expects to issue the detailed injunction by Aug. 5 without another hearing.

The preliminary injunction does not resolve the entire lawsuit. Instead, it reflects the court’s finding that Washington will likely succeed on its claims while the case proceeds.

People experiencing problems related to gambling can contact the Washington State Problem Gambling Helpline at 1-800-547-6133.

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