Kalshi Thwarted in Washington after Judge Grants Preliminary Injunction

A court in Washington has granted the state's request for a preliminary injunction temporarily barring prediction market operator Kalshi from offering contracts on sports-related events.  

According to a court filing from Monday, Judge John McHale of King County Superior Court ruled that Kalshi offers illegal gambling activities to Washington consumers and solicits bets through its website. He also ruled that the potential harm to consumers and the public outweighed any harm that the injunction may cause the company. 

The preliminary injunction won’t take effect until at least August 5, and the court has allowed both parties to submit new evidence by August 3.  

The dispute centers on whether Kalshi's sports-event contracts are governed solely by the federal Commodity Exchange Act (CEA) or are subject to Washington sports betting and gambling laws. Kalshi argues that the CEA takes precedence over state regulation, but Judge McHale concluded that the federal law does not override Washington's authority in this case. 

A Kalshi spokesperson told The Block that the company was disappointed with the ruling, and repeated that states don’t have jurisdiction over prediction markets, citing supportive federal court decisions.  

"States don't have jurisdiction to regulate prediction markets," they said. "Many courts — including the Third Circuit — have made this clear. We're disappointed to see Washington state continue wasting taxpayer dollars." 

This latest ruling adds to a series of recent legal setbacks for Kalshi. Earlier this month, a judge in New York denied the company's request to stop the state from enforcing its gambling laws against the company. Kalshi is already banned from providing sports-related contracts in Nevada and Michigan, and across the US, 19 out of 23 similar cases have gone the way of state regulators. 

Michigan Kalshi dispute rumbles on 

Kalshi’s legal difficulties in Michigan have also intensified. The Commodity Futures Trading Commission (CFTC), which claims federal jurisdiction over prediction market apps, recently ordered the company to honor pending trades in Michigan. The company had proposed canceling them in response to a state court order. 

The federal regulator said it exercised its emergency authority because Kalshi is effectively a registered derivatives exchange and must therefore operate as a single national market. It said that canceling trades based on a customer's state of residence would violate the CEA’s requirement that exchanges offer impartial access. 

Michigan Attorney General Dana Nessel's office rejected the CFTC’s argument, however, saying that it  undermines the state's authority to regulate companies operating within its borders. The state maintains that Kalshi's sports-related event contracts constitute unregulated Michigan sports betting and should comply with the same rules and tax requirements as sportsbooks in the state.  

An Ingham County judge had issued a temporary restraining order to stop Kalshi from offering or advertising sports-related event contracts in the state while the case goes ahead, but questions over how existing trades should be treated as a result led to the CFTC's intervention, further highlighting the continuing federal versus state conflict on the regulation of prediction markets.