A Washington court judge granted state officials a preliminary injunction against Kalshi on Monday, the latest court win for state authorities versus the prediction market platform.
In a King County Superior Court order issued on July 20, Judge John McHale determined that the company “operates an online betting platform” and misleads state consumers by advertising its products as “legal betting.” He also ruled that Kalshi’s sports event contracts are not covered by the Commodity Exchange Act (CEA) under the federal remit of the Commodity Futures Trading Commission (CFTC), despite the company and the commission’s arguments to the contrary.
The preliminary injunction will not go into effect until at least Aug. 5. The court will consider submissions from both sides of the lawsuit before determining the exact parameters of the injunction.
The court ruling was first reported by gaming attorney Daniel Wallach on X.
Washington AG Brown took fight to Kalshi in court
The Washington state court battle was initiated by Attorney General Nick Brown, who sued Kalshi in late March.
Brown alleged that the platform was violating the state’s Gambling Act and Consumer Protection Act by operating and advertising products that equate to illegal sports betting. He asked the court to not only order Kalshi to cease offering its sports contracts in the state, but also to impose civil penalties and to recover all money that Washingtonians have lost through the firm’s “illegal gambling operation”.
In-person betting at tribal casinos is currently the only form of online state-regulated sports wagering that is permitted in Washington.
Washington Indian Gaming Association (WIGA) Executive Director Rebecca George told SBC Americas that Kalshi’s products violate state law and tribal sovereignty. “Slapping ‘prediction market’ on sports betting doesn’t change what it is – it’s gambling, just without the rules and protections Washington requires,” she said via email.
Kalshi attempted to move the suit to federal court, but a judge kept it in state court because, in his view, gambling regulation is a state issue rather than a federal one.
Washington likely to succeed on several counts vs. Kalshi
Judge McHale found that the state is likely to succeed on multiple counts, including the notion that “Congress did not intend to supersede or limit States in regulating gambling or in superseding or limiting the jurisdiction of any court of any State in addressing such regulation” when it drew up the CEA.
“Regulation of gambling and regulation of futures markets are different fields of regulation,” added the judge’s determination.
McHale added that, in the court’s opinion, Washington sufficiently showed that it would suffer irreparable harm if Kalshi continued to operate while the litigation proceeds. He determined that “the public interests at stake”, as well as the potential harm to consumers, would outweigh the potential harm that the company itself would suffer if it had to temporarily shut down.
Kalshi personnel quickly decried the decision.
“States don’t have jurisdiction to regulate prediction markets,” wrote spokesperson Jacki McGavick on X. “Many courts — including the Third Circuit — have made this clear. We’re disappointed to see Washington State continue wasting taxpayer dollars.”
Four state injunctions against Kalshi
Washington is the fourth state that has obtained a preliminary injunction against Kalshi, after:
- Massachusetts
- Michigan
- Nevada
Michigan was the latest to obtain the temporary relief. However, the CFTC told Kalshi to directly contradict a court order to void all outstanding sports contract trades in the state by Aug. 12.
Overall, Wallach told The Block that the Washington ruling means that states have collectively won 19 out of 23 judicial decisions on whether a preliminary injunction or temporary restraining order should be issued in connection with prediction market cases.
Most recently, aside from the Washington and Michigan cases, a federal judge denied Kalshi a preliminary injunction against the New York State Gaming Commission (NYSGC) earlier this month.
