Kalshi Takes Another Court Loss As Washington Orders Prediction Markets To Shut Down

Kalshi has taken another hit in its growing legal fight with U.S. states after a Washington judge ordered the prediction market to stop offering most of its popular event contracts in the state.

King County Superior Court Judge John McHale issued the order on August 13, following a preliminary injunction granted to Washington last month. The ruling prevents Kalshi from offering contracts covering culture, elections, mentions, politics, science, sports and technology, effectively removing many of the markets that have helped drive the company's rapid growth.

The decision adds another complication to Kalshi's argument that its event contracts should be treated as federally regulated financial products rather than gambling. It also shows how closely judges in different states are looking at one another's rulings as the fight between prediction markets and state gambling regulators continues.

Washington Judge Draws A Line Around Kalshi's Markets

Washington regulators have argued that Kalshi's event contracts amount to gambling under state law because users are putting money behind uncertain outcomes.

Judge McHale agreed that the state had grounds to intervene, writing that Washington had demonstrated a “well-grounded fear of immediate invasion of consumers’ legal rights.” The judge also pointed to Kalshi's decision to continue offering event contracts after receiving a notice from the Washington State Gambling Commission that the products were not authorized in the state.

Washington Attorney General Nick Brown welcomed the ruling, arguing that Kalshi had made significant money from markets covering sports, elections, natural disasters and other events.

“Under this order, Kalshi is banned from offering wagers on most of those topics in Washington.”

The order is notable because it does not completely attempt to eliminate every event contract Kalshi offers. Instead, it specifically targets several major categories.

That distinction could matter as courts around the country reach different conclusions about the scope of state authority over prediction markets.

Kalshi Also Faces A Geofencing Deadline

The Washington ruling goes beyond the trading restrictions.

Kalshi has been ordered to implement full geofencing in Washington by September 3, preventing users in the state from accessing the restricted markets.

That has become one of the biggest points of contention in the wider prediction market battle. Operators have argued that state-by-state geofencing could conflict with their obligations as federally regulated exchanges, while states argue that preventing residents from accessing unauthorized gambling products is a standard regulatory requirement.

Judge McHale rejected Kalshi's argument that complying with Washington law would necessarily interfere with federal regulation.

“Complying with Washington law would not prevent Kalshi from complying with applicable Federal law.”

The consequences for Kalshi could be significant. Failure to comply with the geofencing requirement could result in fines of up to $120,000 per day for each day the company remains out of compliance.

Kalshi has already taken a different approach in Nevada, where it withdrew from the state entirely over a similar geofencing requirement. The company has also made concessions in Michigan despite technical issues surrounding its geolocation controls.

Another State Court Ruling Adds To The Prediction Market Split

Washington's decision is particularly interesting because it comes after a very different result in Minnesota.

A federal judge in Minnesota recently blocked enforcement of a state law that sought to ban prediction markets broadly, finding that the legislation could conflict with federal jurisdiction over certain event contracts.

The Washington ruling takes a narrower approach, targeting specific categories rather than attempting to prohibit every event contract offered by a federally regulated exchange.

That growing split is becoming one of the defining features of the prediction market fight. Kalshi is arguing that federal oversight through the Commodity Futures Trading Commission should protect its operations from state gambling laws, while state regulators continue to insist that sports and other event contracts offered to their residents fall under their gambling frameworks.

Washington's order also prevents Kalshi from advertising or marketing its products in the state and requires the company to make good-faith efforts to exclude Washington from national advertising campaigns.

That could become especially important with the NFL season approaching. Sports betting operators traditionally spend heavily on customer acquisition around the start of football season, and prediction markets are now competing for the same audience.

With states continuing to challenge Kalshi while federal regulators defend the company's position, the legal battle is becoming less about one state's gambling rules and more about who ultimately has authority over prediction markets in the United States.

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