A Washington judge has ruled that Kalshi, a platform that lets users bet on events like election outcomes and economic data, likely violated state gambling laws. The decision, issued in Thurston County Superior Court, deals a blow to the company's operations in the state and reignites a long-running legal tug-of-war over who gets to regulate prediction markets — the states or the federal government.
What the judge said
Judge James Dixon found that Kalshi's event contracts amount to gambling under Washington's strict anti-gambling statutes. The state has long treated prediction markets as illegal betting, and the judge agreed that Kalshi's offerings fall squarely within that definition. The ruling is preliminary — it came in response to a motion for a temporary injunction — but it signals that the court sees a strong likelihood that Kalshi is breaking the law.
Washington's Gambling Commission had sued Kalshi, arguing the platform needed a state license. Kalshi countered that it operates under federal oversight from the Commodity Futures Trading Commission, which has allowed its contracts as regulated derivatives. The judge wasn't convinced, saying state law still applies.
Kalshi vows to appeal
Kalshi said it will appeal the ruling. In a statement, the company argued that its contracts are legal under federal law and that the Washington decision conflicts with the CFTC's authority. The company has been operating in a gray area for years, offering bets on everything from interest rates to Oscar winners, but this ruling could force it to shut down in Washington unless the appeal succeeds.
The case is being watched closely by other prediction market operators, including Polymarket, which has faced its own regulatory scrutiny. If the Washington ruling stands, it could embolden other states to crack down on the industry.
Federal vs. state oversight
The dispute highlights a fundamental question: can states ban products that the CFTC has approved? The CFTC has taken a permissive stance toward certain event contracts, treating them as commodities. But states like Washington, New Jersey, and others have their own gambling laws that often conflict.
Kalshi's legal team argues that federal law preempts state gambling statutes when it comes to CFTC-regulated contracts. The judge disagreed, at least at this stage. The appeal will likely test that preemption argument in a higher court.
For now, Kalshi can still operate in Washington while the appeal is pending, but the company faces an uncertain future. The next hearing is set for late next month, where both sides will argue over whether the injunction should be made permanent.
