Washington state judge has blocked Kalshi’s sports markets in preliminary ruling, deepening national showdown over prediction-market regulation
A Washington state judge on July 20 granted a preliminary injunction that will bar Kalshi from offering sports-related prediction markets to Washington residents — another legal setback for the CFTC-registered event-contract exchange. The order, however, won’t take effect before Aug. 5; the court will review additional filings from both sides by Aug. 3.
Why this matters
The ruling thrusts the long-running federal-versus-state fight over prediction markets back into the spotlight. At issue is whether sports event contracts sold by exchanges like Kalshi fall exclusively under federal commodities law (and CFTC oversight) or can also be treated as state-regulated gambling when offered without state authorization.
What the court said
King County Superior Court Judge John McHale sided with Washington’s argument that the Commodity Exchange Act does not preempt the state’s gambling laws. The judge found the state was likely to succeed on the merits and noted consumer-protection concerns as a basis for temporary restrictions, writing that Kalshi “offers illegal gambling activities to Washington consumers.” The court also gave both parties additional time to discuss protections for Washington users while the case proceeds.
Kalshi’s response
Kalshi rejected the ruling, telling The Block that “States don’t have jurisdiction to regulate prediction markets,” and pointing to prior decisions — including a Third Circuit ruling — that favored federal oversight. The company said it was disappointed by Washington’s continued enforcement.
Where this fits into the national picture
The Washington decision is the latest in a patchwork of state- and federal-level litigation:
- Michigan: In June, a state judge temporarily stopped Kalshi’s sports event contracts in Michigan. That order later collided with federal action — the CFTC blocked Kalshi from unwinding some Michigan positions after the state court order, creating conflicting instructions for the exchange.
- New York: A federal judge denied Kalshi’s attempt to block New York from enforcing its gambling laws against sports-related event contracts, on the same preemption question.
- Minnesota: The state has already cited the Washington ruling as supplemental authority in its pending lawsuits against Kalshi, Polymarket and the CFTC; a decision from Judge Katherine Menendez is expected soon.
- Nevada and others: Washington now joins Nevada and Michigan as jurisdictions that have restricted Kalshi’s sports products.
- North Carolina: By contrast, North Carolina passed legislation recognizing federally registered prediction markets and setting a tax framework for them starting in 2027.
The CFTC’s stance
The Commodity Futures Trading Commission has generally taken the opposite view of several states, arguing that Congress vested it with exclusive authority over event contracts offered by registered derivatives exchanges. The CFTC has sued states such as New York, and expanded litigation into New Mexico and Kentucky, seeking to block state gambling rules from reaching federally regulated prediction markets.
Industry and market impact
The disputes come as interest in prediction markets has surged. Kalshi reported about $33 billion in monthly trading volume in June, compared with roughly $13.95 billion for Polymarket and its U.S. platform combined, according to The Block’s data. Kalshi is also branching into products beyond event markets, exploring crypto perpetual futures to compete more directly with major digital-asset trading platforms.
What’s next
The Washington injunction will be stayed until at least Aug. 5 while the court reviews extra submissions due Aug. 3. The underlying lawsuit — in which Washington seeks to stop Kalshi’s operations in the state and pursue restitution and civil penalties — will continue. Meanwhile, conflicting rulings and ongoing CFTC litigation mean prediction-market operators face a fragmented legal landscape across the U.S., with significant regulatory and operational implications for crypto-linked futures and other novel products.
Legal observers note that states have prevailed in many initial injunction requests: attorney Daniel Wallach says states have won 19 of 23 preliminary injunction or temporary restraining order decisions in similar cases so far — a pattern that may influence pending fights in Minnesota and elsewhere.
Bottom line: The Washington decision is another sign that prediction markets are being contested state-by-state, even as the CFTC pushes for federal uniformity. For Kalshi and other platforms exploring crypto derivatives, the outcome of these cross-jurisdictional battles will shape how — and where — they can legally offer new products.
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