Washington Court Grants Preliminary Injunction Against Kalshi, Rejects Federal Preemption Arguments

A Washington state judge has dealt Kalshi another significant courtroom setback, granting a preliminary injunction that will bar the prediction market platform from offering sports-related event contracts to residents. King County Superior Court Judge John McHale ruled on July 20 that the state is likely to succeed in proving Kalshi’s contracts violate Washington’s gambling and consumer protection laws, and he flatly rejected the company’s argument that federal law shields it from state enforcement.

The ruling is the latest development in a legal fight that began in March, when Washington Attorney General Nick Brown sued Kalshi, accusing the company of operating an unlicensed online betting platform disguised as a financial exchange. Washington has some of the strictest anti-gambling laws in the country, banning internet gambling outright since 2006 and limiting legal sports wagering to in-person bets on tribal land.

The Preemption Argument Falls Short Again

Kalshi’s central defense across dozens of state-level lawsuits has been that its status as a Commodity Futures Trading Commission-regulated exchange places its event contracts under exclusive federal jurisdiction, preempting any state gambling law. In a 14-page order, McHale rejected that theory outright, writing that “the Commodity Exchange Act does not preempt Washington State gambling law” and finding that Kalshi could comply with both federal requirements and state prohibitions simultaneously.

McHale pointed to language within the Commodity Exchange Act itself stating that nothing in the statute supersedes or limits the authority of state regulators or state courts. He also cited a CEA provision allowing the CFTC to review event contracts tied to gaming or any activity “unlawful under any Federal or State law,” concluding that Congress intended states to retain authority over what counts as illegal gambling within their own borders — meaning the same Kalshi contract could be lawful in one state and prohibited in another.

The decision arrives just months after the Third Circuit Court of Appeals reached the opposite conclusion in a separate case involving New Jersey, ruling 2-1 that sports event contracts traded on federally regulated exchanges qualify as swaps under the CEA and are therefore preempted from state gambling oversight. That split between federal appellate reasoning and state court rulings like Washington’s has created exactly the kind of conflicting legal landscape that could eventually push the preemption question toward the U.S. Supreme Court.

What Happens Next for Washington Bettors

The injunction won’t take effect immediately. McHale said the court intends to issue a follow-up order spelling out the specific terms of the preliminary injunction by August 5, giving both sides until August 3 to submit agreed-upon or competing proposed terms. In the meantime, he has already ordered Kalshi to preserve all records tied to Washington consumers.

Once the injunction takes full effect, Kalshi will likely need to geoblock Washington residents from accessing its sports-related contracts, joining a growing list of states — including Nevada and Arizona — where the company has faced enforcement action. A Kalshi spokesperson pushed back on the ruling, telling reporters that “states don’t have jurisdiction to regulate prediction markets” and pointing to the Third Circuit’s favorable ruling as precedent the company will continue to lean on.

For now, the case underscores just how unsettled the legal status of prediction markets remains nationwide. As more states weigh in with contradictory rulings, bettors and operators alike are left navigating a patchwork landscape where the legality of the same product can hinge entirely on which side of a state line you’re standing on. Readers who want to understand how these platforms differ from traditional sportsbooks can find more detail in prediction markets vs. sports betting resources, while those tracking the two biggest platforms head-to-head may find the Kalshi vs. Polymarket comparison useful context for where this fight is headed.