Meta description: Washington’s July 20 Kalshi injunction adds pressure to the legal fight over state gambling laws and federal event-contract oversight.
Tags: Kalshi, CFTC, Washington, Nevada, New York, Commodity Exchange Act
Market platform: Kalshi
Category: Regulation
Kalshi’s Washington case now centers on a July 20 preliminary injunction in King County Superior Court. Judge John McHale found that Washington was likely to succeed on claims that Kalshi violated state gambling and consumer-protection law, while the Commodity Futures Trading Commission continues to argue that federally registered prediction markets sit under its exclusive federal jurisdiction.
What did the Washington court order against Kalshi?
McHale granted Washington’s request for a preliminary injunction against Kalshi on July 20, according to the Washington Attorney General’s Office and Reuters. The order found that the state had shown a likelihood of success on claims that Kalshi violated the Washington Gambling Act and Consumer Protection Act by operating an online platform where users could trade event contracts tied to sports, elections and other future events.
The Washington Attorney General’s Office said on July 21 that Kalshi and the state were expected to confer on the terms of the injunction and submit additional briefing on remedies, with a final order expected August 5. The July ruling required Kalshi to stop violating Washington gambling and consumer-protection law while the case proceeds.
Reuters reported that McHale rejected Kalshi’s argument that the Commodity Exchange Act preempted Washington’s gambling laws at the preliminary-injunction stage. Reuters also reported that the judge found a likelihood of actual and substantial injury to Washington consumers if an injunction was not issued. The court found that the public interest and potential harm to consumers outweighed Kalshi’s claimed harm from complying with state restrictions.
How did Washington frame the case?
Washington Attorney General Nick Brown sued Kalshi on March 27, alleging that the company violated state law by operating and advertising an online platform where users could bet on sports, elections and other events. Brown’s office said Kalshi’s contracts included markets tied to the number of measles cases, statements during a child-trafficking hearing and potential outcomes in the Iran war.
The March complaint framed Kalshi as an illegal gambling operator, not merely as a neutral exchange registered with a federal commodities regulator. Brown said in the Attorney General’s March 27 announcement: “For Kalshi, every event, every tragedy is nothing more than a potential way for Americans to risk their fortunes.”
After the July 20 ruling, Brown’s office called the preliminary injunction a first step toward holding Kalshi accountable. The office said Washington law defines gambling as staking or risking something of value on the outcome of a contest of chance or a future contingent event. It also cited a 2006 amendment to the state’s 1973 Gambling Act that prohibits internet gambling in Washington.
What is the CFTC’s position?
The CFTC has taken the opposite position in related state enforcement fights. In a July 14 press release, the agency said it used emergency authority to stay a Kalshi emergency rule change responding to a Michigan state court order that directed the company to cancel certain previously executed trades involving Michigan residents. The CFTC also ordered Kalshi to fulfill those open trades under its normal practices.
CFTC Chairman Michael Selig said in that release that a state cannot force a designated contract market to violate its federal obligations. The agency said the Commodity Exchange Act requires a uniform national market in derivatives transactions and bars discriminatory access criteria for registered entities. That emergency action addressed already executed Michigan trades, not a blanket order covering Washington operations.
The CFTC has also sued state regulators. In the same July 14 release, the agency said it had filed lawsuits against Arizona, Connecticut, Illinois, Kentucky, Minnesota, New Mexico, New York, Rhode Island and Wisconsin to protect the jurisdiction Congress granted it. The agency has separately filed amicus briefs in the Sixth and Ninth Circuits and in the Massachusetts Supreme Judicial Court.
How are federal courts treating state gambling laws?
The appellate record is divided by jurisdiction and procedural posture, but Kalshi has a significant federal appellate win. On April 6, the U.S. Court of Appeals for the Third Circuit affirmed a preliminary injunction in KalshiEX LLC v. Flaherty, holding that Kalshi had shown a reasonable chance of success on its argument that the Commodity Exchange Act preempts New Jersey gambling laws as applied to sports-related event contracts traded on a CFTC-licensed designated contract market.
The Third Circuit said Kalshi’s sports-related event contracts are swaps under the Commodity Exchange Act and that New Jersey’s enforcement would create the kind of state-by-state patchwork Congress displaced when it created the CFTC. That ruling binds courts in the Third Circuit, not Washington state court, but it is the clearest federal appellate ruling so far on Kalshi’s core preemption theory.
Other courts have not followed the same path. In Washington, McHale concluded at the preliminary stage that federal commodities law did not block state gambling enforcement. In Nevada, federal district-court proceedings initially favored Kalshi, then shifted against the company. Court summaries and the Nevada docket place the dissolution of Kalshi’s preliminary injunction in late November 2025, after the district court concluded that sports event contracts did not fall within the CFTC’s exclusive jurisdiction. Kalshi appealed to the Ninth Circuit.
Where do Nevada and Michigan fit into the conflict?
Nevada remains one of the most active state fronts. The Nevada Gaming Control Board sent Kalshi a cease-and-desist letter in March 2025, and litigation followed in federal court. The federal district-court docket and later appellate filings show that the case moved from an injunction fight into a Ninth Circuit appeal over questions that overlap with Washington’s and New Jersey’s disputes.
Geolocation compliance has become a central issue in Nevada. A Nevada Gaming Control Board filing, described by SBC Americas, said investigators placed eight prohibited trades across May 28, May 30, May 31 and June 1, 2026, while testing whether Kalshi had blocked restricted activity. That record is separate from the Michigan dispute, where the CFTC’s July emergency order focused on whether Kalshi could unwind trades that had already been executed by Michigan residents.
Together, Michigan and Nevada show why the legal fight is no longer only about whether contracts may be listed. States are pressing for consumer blocking, trade cancellation, penalties and gambling-law remedies. The CFTC is pressing the opposite institutional claim: state orders cannot interfere with the operation of federally registered derivatives markets.
How large is Kalshi’s exposure?
Kalshi’s legal exposure is growing during a major capital and volume expansion. The company announced on May 7 that it raised $1 billion at a $22 billion valuation in a Series F round led by Coatue, with participation from Sequoia Capital, Andreessen Horowitz, IVP, Paradigm, Morgan Stanley and ARK Invest. Those figures are company-reported financing terms.
New York has added another high-stakes case. On July 31, Governor Kathy Hochul and Attorney General Letitia James announced that New York sued Kalshi for allegedly running an illegal gambling operation. The Attorney General’s Office said the lawsuit seeks an order stopping Kalshi from operating as an unlicensed gambling business, along with forfeiture of illegal gains, restitution to users and fines equal to three times the gains the company allegedly made through unlawful actions.
The American Gaming Association is also pressing the tax argument from the regulated-gambling industry’s side. In its May 2026 revenue tracker, the AGA said prediction market platforms offering sports bets had cost state governments more than an estimated $1 billion in potential gaming taxes since the start of 2025. The AGA also said Kalshi alone handled nearly $15 billion in sports betting volume in May. Those figures come from the gaming industry’s principal trade association, which has a direct stake in state-regulated gambling markets.
What happens next?
The next concrete milestones are in the courts. Washington’s July 20 preliminary injunction keeps the state case moving in King County Superior Court. The CFTC’s state-enforcement lawsuits, including cases involving New York and other states, will test how far federal jurisdiction extends outside the Third Circuit’s April ruling in KalshiEX LLC v. Flaherty. The Ninth Circuit appeal in the Nevada case is the next major appellate venue for the same federalism fight.
