A Washington state judge has dealt another legal setback to Kalshi by granting a preliminary injunction that will block the company from offering sports-related prediction markets to residents of the state.
The ruling was issued by King County Superior Court Judge John McHale on July 20. The judge found that Washington is likely to succeed in its case against Kalshi, although the order will not take effect until at least August 5. Both sides have until August 3 to submit additional information before enforcement begins.
At the center of the dispute is a growing national debate over whether sports prediction markets should be regulated under federal commodities law or state gambling laws.
Kalshi argues that because it operates as a federally regulated exchange under the Commodity Futures Trading Commission (CFTC), its event contracts fall under federal jurisdiction. Washington state disagrees, claiming that sports-related contracts offered without state approval amount to illegal gambling.
Judge McHale sided with the state’s position for now, ruling that the Commodity Exchange Act does not prevent Washington from enforcing its own gambling laws against Kalshi. The judge also cited consumer protection concerns and stated that Kalshi appears to be offering activities that violate state gambling regulations.
Kalshi rejected the ruling and maintained that prediction markets are governed by federal law, not state gambling authorities. The company pointed to previous court decisions that it believes support federal oversight of prediction markets.
Washington originally sued Kalshi in March, alleging that the company was offering and promoting unlicensed betting products tied to sports, elections, and other real-world events.
The Washington decision follows similar legal challenges in other states. In Michigan, a court temporarily blocked Kalshi’s sports event contracts after state regulators argued that the company lacked the necessary gambling licenses. New York has also won an early court victory after a judge allowed the state to enforce its gambling laws against Kalshi’s sports-related markets.
The growing number of state-level rulings has increased pressure on Kalshi. According to legal observers, states have won most of the early court battles involving prediction market regulation.
Meanwhile, the CFTC continues to support the view that federally regulated prediction markets fall under its authority rather than state gambling laws. The agency has even filed lawsuits against some states in an effort to stop local regulators from restricting federally approved event contracts.
Not all states are taking the same approach. North Carolina recently moved in the opposite direction by passing legislation that recognizes federally registered prediction markets and creates a framework for their operation.
Despite the legal challenges, Kalshi’s business continues to grow rapidly. The platform reportedly recorded around $33 billion in monthly trading volume in June and has expanded its offerings while exploring new products, including crypto-related trading services.
For now, Kalshi can continue operating its sports contracts in Washington until the court’s order takes effect. However, the case highlights the ongoing uncertainty surrounding prediction markets as courts across the United States continue to debate where regulatory authority ultimately belongs.
