CFTC Innovation Committee Meeting Puts Kalshi’s State-Law Fight Back in Washington’s View

Meta description: CFTC Innovation Advisory Committee meets August 20 as Kalshi’s Washington injunction sharpens the event-contract preemption fight.

Tags: Kalshi, Polymarket, CFTC, Washington Attorney General, Michael Selig, Nick Brown

Market platform: Kalshi

Category: Regulation

The CFTC’s Innovation Advisory Committee is scheduled to meet in Washington at 1 p.m. Eastern time on August 20, according to the agency’s August 10 notice. The meeting comes after Washington Attorney General Nick Brown won preliminary relief against Kalshi in King County Superior Court, adding a state-court ruling to the industry’s fight over whether federal derivatives law displaces state gambling enforcement.

The committee cannot decide whether state gambling laws apply to event contracts listed on CFTC-regulated exchanges. Its importance is procedural and political: the CFTC has made prediction markets one of its stated innovation priorities, while state regulators and attorneys general argue that sports and other event contracts can operate as illegal online gambling when offered to residents.

What is happening at the CFTC on August 20?

CFTC Chairman Michael S. Selig announced that the Innovation Advisory Committee will meet at 1 p.m. Eastern time on August 20 in Washington, with a livestream available through CFTC.gov. The CFTC’s event notice says the committee was created to advise the commission on issues at the intersection of technology, law, policy, and finance.

The agency launched the committee on January 12 by renaming the former Technology Advisory Committee, then announced an initial 35-member roster on February 12. That February roster included Kalshi CEO Tarek Mansour, Polymarket CEO Shayne Coplan, Ripple CEO Brad Garlinghouse, Coinbase CEO Brian Armstrong, FanDuel President Christian Genetski, DraftKings CEO Jason Robins, Robinhood CEO Vlad Tenev, CME Group Chair and CEO Terry Duffy, Intercontinental Exchange CEO Jeff Sprecher, and other market infrastructure, crypto, fintech, academic, and industry representatives.

The current CFTC Innovation Advisory Committee page lists additional members beyond the February announcement, including BitGo CEO Mike Belshe, Multicoin Capital co-founder Tushar Jain, Franklin Templeton CEO Jenny Johnson, Fanatics CEO Matt King, Consensys founder Joseph Lubin, Lighter founder Vladimir Novakovski, OKX Global Managing Partner Haider Rafique, and FalconX co-founder Raghu Yarlagadda.

For prediction-market operators, the roster matters because it puts exchange founders, sportsbook executives, crypto firms, traditional market operators, and academics inside the same federal advisory structure. Any recommendations from the committee are advisory, and the CFTC’s notice states that committee views do not necessarily reflect the views of the commission, its staff, or the U.S. government.

Why is Washington’s Kalshi order central to the fight?

Washington’s case is one of the clearest state-court rulings against Kalshi’s position that CFTC oversight displaces state gambling law. On July 21, the Washington Attorney General’s Office said it had won a preliminary injunction after King County Superior Court Judge John McHale found that Kalshi likely violated the Washington Gambling Act and the Consumer Protection Act.

The attorney general’s release said the court found Kalshi likely ran an illegal gambling operation in Washington. Brown framed the case as a consumer-protection and gambling-enforcement matter, saying Kalshi promoted betting on sports, elections, measles cases, witness statements at a child-trafficking hearing, and natural disasters. The release also cited Washington’s statutory definition of gambling as risking something of value on a contest of chance or future contingent event.

The ruling did not resolve the full case. A preliminary injunction turns on likelihood of success, risk of harm, the balance of equities, and public interest while litigation continues. Reuters, citing the July 20 decision, reported that Judge McHale found a likelihood of actual and substantial injury to Washington consumers if no injunction issued, and that the public interest and consumer harm outweighed harm to Kalshi.

How did the Washington case get back to state court?

Washington filed its complaint against Kalshi in King County Superior Court on March 27, according to the federal docket in State of Washington v. KalshiEX LLC, No. 2:26-cv-01062, in the U.S. District Court for the Western District of Washington. Kalshi removed the case to federal court the same day.

U.S. District Judge John C. Coughenour granted Washington’s motion to remand on May 5. The federal docket shows a May 22 letter to King County Superior Court remanding the case, and a May 21 Ninth Circuit order denying Kalshi’s motion for a stay pending appeal. That remand left the state court to decide Washington’s request for preliminary relief.

The procedural path matters because prediction-market cases are not all landing in the same forum. Kalshi and the CFTC have pressed federal preemption arguments in federal courts, while several states have tried to keep gambling-law and consumer-protection actions in state court. Washington’s July ruling shows that, in one state-court posture, Kalshi’s CFTC-regulated status did not prevent preliminary relief under state law.

What is the CFTC’s preemption theory?

The CFTC has argued that federal law gives it exclusive authority over event contracts listed on designated contract markets. In Release No. 9230-26, dated May 12, the agency said it filed an amicus brief in KalshiEx LLC v. Matthew T. Schuler, et al., No. 26-3196, in the U.S. Court of Appeals for the Sixth Circuit, asserting exclusive jurisdiction over prediction markets.

The same CFTC release said the agency’s brief described a comprehensive federal regulatory structure that preempts state laws as applied to CFTC-regulated markets. The release also said the CFTC had filed lawsuits against Arizona, Connecticut, Illinois, New York, and Wisconsin, and had filed amicus briefs in the Ninth Circuit and the Supreme Judicial Court of Massachusetts.

Arizona is the CFTC’s strongest cited example so far. In Release No. 9211-26, dated April 10, the agency said the U.S. District Court for the District of Arizona granted a temporary restraining order barring Arizona from continuing criminal enforcement against CFTC-regulated designated contract markets. On May 5, U.S. District Judge Michael T. Liburdi granted a preliminary injunction in KalshiEX LLC v. Johnson, No. 2:26-cv-01715, concluding that the Commodity Exchange Act preempts Arizona gambling laws when they seek to regulate derivatives traded on CFTC-regulated markets.

That Arizona ruling cuts the other way from Washington’s state-court order. The split is not a final appellate conflict, but it captures the central legal question: whether an event contract remains a federally regulated derivative for all relevant purposes once listed by a CFTC-regulated exchange, or whether states can still apply gambling and consumer-protection laws to contracts they view as bets offered to local residents.

What does the CFTC’s rulemaking track add?

The advisory committee meeting sits alongside a broader CFTC policy track. The agency’s Innovation page lists prediction markets and event contracts as one of three innovation focus areas, along with crypto assets and blockchain technologies, and artificial intelligence and autonomous systems.

On March 12, according to the CFTC Innovation Tracker, the Division of Market Oversight issued a prediction-markets advisory reminding designated contract markets of their obligations under the Commodity Exchange Act and CFTC regulations. The same tracker says the agency published an advance notice of proposed rulemaking on prediction markets, seeking comment on core principles, event contracts that may be prohibited as contrary to the public interest, cost-benefit considerations, and related issues.

On July 24, the Division of Market Oversight issued an advisory on self-certification of an event contract series. The CFTC described that advisory as addressing concerns about broad, template-style certifications that combine many possible event-contract variations into a single filing, and as a reminder to designated contract markets about self-certification procedures.

Those steps do not decide the Washington case or any other state enforcement action. They show the CFTC moving on two fronts at once: defending its jurisdiction in court and building a policy record around how event contracts should be listed, reported, monitored, and reviewed.

What is the next concrete milestone?

The next dated federal milestone is the Innovation Advisory Committee meeting at 1 p.m. Eastern time on August 20 in Washington, according to the CFTC’s notice. The next legal milestones will come from state and federal dockets, including the Sixth Circuit appeal in KalshiEx LLC v. Schuler and the CFTC’s pending suits against states including Arizona, Connecticut, Illinois, New York, and Wisconsin.

For exchanges, brokers, and sportsbook incumbents watching the market, the question is which forum moves first with rules that survive challenge: state courts applying gambling law, federal courts applying the Commodity Exchange Act, or the CFTC through rulemaking and market-supervision guidance.