Kalshi sports prediction markets blocked in Washington court ruling

A Washington state judge has granted a preliminary injunction that will block Kalshi from offering sports-related prediction markets to residents, adding another court setback for the federally regulated event-contract platform.

King County Superior Court Judge John McHale granted Washington’s request on July 20, finding that the state was likely to succeed in its case against Kalshi. However, the order will not take effect before Aug. 5. The court will review additional submissions from both sides by Aug. 3 before the restriction starts.

The ruling centers on a growing legal dispute over whether sports event contracts fall exclusively under federal commodities law or can also face state gambling rules. Kalshi argues that its status as a Commodity Futures Trading Commission-regulated exchange places its contracts under federal jurisdiction. Washington disagrees and considers the sports products illegal gambling when offered without state authorization.

Washington judge rejects Kalshi’s federal preemption argument

Judge McHale ruled that the Commodity Exchange Act does not prevent Washington from applying its gambling laws to Kalshi. The state sued the company in March, accusing it of offering and advertising unlicensed online betting products covering sports, elections and other real-world events.

The court found that consumer protection concerns supported temporary restrictions while the case continues. McHale wrote that Kalshi “offers illegal gambling activities to Washington consumers.” The judge also gave the parties additional time to discuss how Kalshi could protect Washington users while responding to the order.

Kalshi rejected the court’s view of state authority. A company spokesperson told The Block that “States don’t have jurisdiction to regulate prediction markets,” pointing to decisions including a Third Circuit ruling that favored federal oversight. The company said it was disappointed with Washington’s continued enforcement effort.

The Washington Attorney General’s Office originally asked the court to stop Kalshi from operating in the state and sought restitution for affected consumers and civil penalties. The state argues that labeling sports wagers as event contracts does not remove them from Washington gambling laws.

State courts add pressure on Kalshi sports contracts

The Washington order follows similar legal action in other states. In June, a Michigan judge temporarily stopped Kalshi from offering sports event contracts after state officials argued that the company was operating without the licenses required under Michigan gambling law.

That case later created a direct conflict between state and federal regulators. As crypto.news reported, the CFTC blocked Kalshi from unwinding some Michigan positions after the state court ordered the company to stop its sports market activity. Kalshi said the competing instructions left it caught between federal and state requirements.

New York has also won an early court round. As previously reported, a federal judge rejected Kalshi’s request to stop the state from enforcing its gambling laws against sports-related event contracts. The court found that the Commodity Exchange Act did not prevent New York from applying those rules.

In addition, Minnesota has already filed the Washington ruling as supplemental authority in its pending cases against Kalshi, Polymarket and the CFTC, according to attorney Daniel Wallach. Judge Katherine Menendez is expected to rule soon, making the Washington decision relevant to another state-level fight over prediction market regulation.

Wallach said states have won 19 of 23 court decisions involving requests for preliminary injunctions or temporary restraining orders in prediction market cases. Washington is now positioned to join Nevada and Michigan among jurisdictions where Kalshi faces restrictions on sports products.

CFTC and states remain divided over prediction market authority

The CFTC has taken the opposite position from several states. The federal regulator argues that Congress gave it exclusive authority over event contracts offered by registered derivatives exchanges. It has filed lawsuits against several states seeking to stop local gambling rules from reaching federally regulated prediction markets.

As crypto.news reported in April, the CFTC sued New York after the state sought to apply gambling laws to prediction market products. The agency later expanded its legal campaign to other jurisdictions, including New Mexico and Kentucky.

However, court decisions have not produced one nationwide rule. North Carolina has taken a different route.The state passed legislation recognizing federally registered prediction markets and allowing them to operate under a new tax framework from 2027.

The split leaves Kalshi operating under different legal conditions across the U.S. The Washington case will continue after the preliminary injunction stage, and the broader question of federal versus state authority remains before several courts.

Kalshi’s growth continues despite expanding court battles

The legal disputes come as trading activity on prediction markets has grown sharply. Kalshi recorded about $33 billion in monthly trading volume in June, compared with a combined $13.95 billion for Polymarket and its U.S. platform, according to The Block’s data dashboard.

Kalshi has also expanded beyond traditional event markets. The company has explored crypto perpetual futures as it seeks to compete more directly with major digital asset trading platforms. Meanwhile, it has continued defending its core prediction market business against state enforcement actions.

The Washington order does not immediately shut down Kalshi’s sports contracts in the state. The court has delayed enforcement until at least Aug. 5 while it reviews further material from the parties. The case will then continue as Kalshi argues that federal derivatives law protects its products from state gambling regulation.