King County Superior Court Judge John McHale granted Washington a preliminary injunction against Kalshi on July 20, finding the state is likely to show that the CFTC-regulated prediction market violated Washington gambling and consumer-protection law. The order also rejected Kalshi’s central federal defense, holding at this stage that the Commodity Exchange Act does not preempt Washington gambling law.
The case is State of Washington v. KalshiEX LLC, No. 26-2-10264-3 SEA. Attorney General Nick Brown filed the lawsuit on March 27, 2026, accusing Kalshi of operating and advertising an online platform where Washington users could wager on sports, elections and other future events. Brown’s office said in a March 27 release that the complaint seeks to stop the challenged activity, recover money lost by Washington residents and assess civil penalties.
Kalshi removed the case to the U.S. District Court for the Western District of Washington, arguing that the dispute belonged in federal court because its market activity is regulated under federal commodities law. U.S. District Judge John C. Coughenour rejected that jurisdictional move on May 5 and remanded the case to King County Superior Court, writing in the federal remand order that Washington’s complaint targeted conduct described under state gambling and money-lost-at-gambling statutes.
What did Washington win against Kalshi?
Washington won preliminary relief, not a final trial judgment. Brown’s office said in a July 21 release that the King County court found Kalshi likely violated the Washington Gambling Act and the Consumer Protection Act by running an illegal gambling operation in the state. The court also found a likelihood of substantial injury to Washington consumers if an injunction did not issue.
McHale’s ruling went beyond forum and procedure. According to reports describing the 14-page order, the judge rejected Kalshi’s argument that the Commodity Exchange Act blocks Washington from applying its gambling laws to Kalshi’s event contracts. The Block reported that the order stated the CEA does not preempt Washington state gambling law and that the injunction would not take effect before August 5, after further submissions on terms.
That distinction matters for the industry. A preliminary injunction usually turns on likelihood of success, potential harm and the public interest. It is not the same as a final judgment after trial. Still, it gives Washington a state-court ruling against the preemption theory Kalshi has used in other jurisdictions to argue that federal commodities law blocks state gambling enforcement.
Why does Washington say Kalshi is gambling?
Washington’s theory starts with the state’s statutory definition of gambling. RCW 9.46.0237 defines gambling as risking something of value on a contest of chance or a future contingent event outside the person’s control, with an understanding that someone will receive value if a certain outcome occurs. The statute also excludes several categories, including bona fide business transactions in securities or commodities and insurance-like contracts.
The state’s complaint, according to the attorney general’s public summary and the federal remand order, argues that Kalshi’s event contracts fall on the gambling side of that line when offered to Washington residents. The complaint also invokes Washington’s Consumer Protection Act. RCW 19.86.020 bars unfair or deceptive acts or practices in trade or commerce, while RCW 4.24.070 creates a civil cause of action to recover money lost at illegal gambling games.
The Washington attorney general’s office framed the suit around Kalshi’s broader menu of event contracts. Its March filing announcement cited wagers tied to sports, elections, measles cases, witness statements in a child-trafficking hearing and war-related outcomes. Brown’s office also pointed to Kalshi advertising that described betting as legal in Washington, a claim the state says misled consumers.
How did the federal court handle Kalshi’s removal?
Judge Coughenour’s May 5 remand order did not decide the merits of Kalshi’s Commodity Exchange Act preemption defense. It decided that Kalshi had not shown a proper basis for keeping Washington’s enforcement action in federal court. The order said the complaint appeared to target conduct Washington defines as gambling, and that gambling regulation sits within traditional state police powers.
The court also rejected Kalshi’s federal-officer and federal-property theories for removal. Kalshi had argued that the CFTC was a necessary party or that Kalshi held property with title derived from the CFTC. The federal court declined to adopt that approach and sent the case back to state court, while refusing Washington’s request for attorney fees because the issues were relatively novel.
That procedural step gave Washington the forum it wanted. The July 20 preliminary injunction then gave Washington a substantive state-court ruling on likelihood of success, including a rejection of Kalshi’s preemption argument at the injunction stage.
How does the ruling compare with Kalshi’s New Jersey win?
Kalshi has a major appellate win outside Washington. On April 6, 2026, the U.S. Court of Appeals for the Third Circuit affirmed a preliminary injunction blocking New Jersey officials from enforcing state gambling restrictions against Kalshi’s sports-related event contracts. In KalshiEX LLC v. Flaherty, No. 25-1922, the Third Circuit held that Kalshi had shown a reasonable chance of success on its argument that the Commodity Exchange Act preempts New Jersey law as applied to swaps traded on CFTC-licensed designated contract markets.
That decision does not control a Washington state court. The Third Circuit covers New Jersey, Pennsylvania, Delaware and the Virgin Islands. Washington sits in the Ninth Circuit, and the Washington case is proceeding in King County Superior Court after remand. The result is a practical split: Kalshi can point to federal appellate authority supporting preemption, while Washington can point to a state-court injunction rejecting that defense at the preliminary stage.
Other states are pressing similar claims. Arizona Attorney General Kris Mayes announced criminal charges against Kalshi entities on March 17, 2026, alleging an illegal gambling business and election wagering. Michigan Attorney General Dana Nessel filed a March 5 lawsuit alleging violations of Michigan’s Lawful Sports Betting Act. New York Attorney General Letitia James and Gov. Kathy Hochul announced a July 31 lawsuit accusing Kalshi of running an illegal gambling operation in New York.
What is the CFTC doing while states sue?
The CFTC is simultaneously trying to clarify how federal rules apply to prediction markets. On March 16, 2026, the agency published an advance notice of proposed rulemaking on prediction markets, asking for public comment on event contracts, statutory core principles and contracts that may be contrary to the public interest. The comment period closed April 30.
On June 10, the CFTC announced a more targeted proposal to amend Regulation 40.11, focused on event contracts involving enumerated activities under the Commodity Exchange Act, including terrorism, assassination, war, gaming and conduct unlawful under federal or state law. The proposal would define key terms and establish a framework for the agency’s public-interest review.
The agency is led by Chairman Michael S. Selig, who was sworn in on December 22, 2025, according to his official CFTC biography. The CFTC rulemaking is central to the state-federal dispute because Kalshi and state attorneys general are fighting over whether federally listed event contracts can also be treated as illegal gambling when offered inside a particular state.
What is the practical stake for prediction markets?
The Washington case is a test of whether state gambling law can reach a federally regulated prediction-market exchange when the state alleges the product is functionally wagering. For Kalshi, adverse rulings state by state could mean narrower market access, more geolocation controls and higher litigation costs. For state attorneys general, a durable injunction would support the theory that CFTC registration does not displace state gambling enforcement.
The broader legal stake is appellate review outside the Third Circuit. If Washington’s ruling is appealed, the case could help determine whether Kalshi’s New Jersey win becomes the industry’s dominant rule or one side of a wider state-by-state fight over sports, elections and other event contracts.
