Meta description: Washington won a preliminary injunction against Kalshi after a King County judge found its event contracts likely violate state gambling law.
Tags: Kalshi, Washington Attorney General, CFTC, King County Superior Court, prediction markets
Market platform: Kalshi
Category: Regulation
Washington Attorney General Nick Brown won a preliminary injunction against Kalshi on July 20, 2026, after a King County Superior Court judge found the exchange likely violated the Washington Gambling Act and the state Consumer Protection Act. The order adds Washington to the state-by-state legal fight over whether federally regulated event contracts can be blocked under state gambling law.
The ruling does not resolve the national preemption question that has split courts in 2026. Kalshi is a Commodity Futures Trading Commission-designated contract market, a status the CFTC granted in November 2020, but Washington’s case treats the company’s sports, election and other event contracts as unlawful online gambling when offered to state residents.
What did the Washington court rule against Kalshi?
The Washington Attorney General’s Office said in a July 21 release that it won a preliminary injunction after the King County Superior Court found Kalshi likely violated the Washington Gambling Act and Consumer Protection Act by operating in the state. The office said the court would issue a final order after Kalshi and the state conferred on injunction terms and submitted further briefing on remedies.
The state’s theory is straightforward: Washington law defines gambling as risking something of value on a contest of chance or future contingent event, and the Attorney General argues Kalshi’s event contracts fall within that definition. In its March 27 complaint announcement, the Attorney General’s Office said Kalshi allowed Washington users to trade on sports, elections and other events, including measles case counts, court-hearing language and geopolitical outcomes.
Brown framed the case as both a gambling and consumer protection action. The March complaint sought to stop the challenged activity, recover money lost by Washingtonians and assess civil penalties. The July preliminary injunction gave the state an early win on likelihood of success, but the broader question, whether Washington can enforce those laws against a CFTC-regulated exchange, remains tied up with parallel federal and state litigation around the country.
Why is Kalshi arguing federal law controls?
Kalshi’s core defense is that it operates as a CFTC-regulated designated contract market, not as a sportsbook. The CFTC announced on November 4, 2020, that it issued an order designating KalshiEX LLC as a contract market under Section 5 of the Commodity Exchange Act and CFTC Regulation 38.3(a). That status subjects Kalshi to federal exchange rules, including CFTC requirements applicable to designated contract markets.
The legal fight turns on preemption. Kalshi and the CFTC have argued in multiple cases that state gambling regulators cannot prohibit event contracts listed on a federally regulated derivatives exchange. State regulators have responded that calling a product an event contract does not strip them of authority over gambling activity aimed at their residents.
The Washington case has already moved between court systems. According to the federal docket in State of Washington v. KalshiEX LLC, case No. 2:26-cv-01062 in the Western District of Washington, Kalshi removed the state case to federal court after the March filing. U.S. District Judge John C. Coughenour remanded the case to King County Superior Court in May. The Ninth Circuit denied Kalshi’s motion for a stay pending appeal of that remand order on May 21.
That procedural history matters because it left the Attorney General’s lawsuit moving forward in state court while federal appellate courts continue to weigh related preemption arguments in other states.
How does Washington fit into the national Kalshi litigation?
Washington’s preliminary injunction sits in a fractured map of decisions on sports-related event contracts. In New Jersey, Kalshi won a major appellate ruling. On April 6, 2026, the U.S. Court of Appeals for the Third Circuit held in KalshiEX LLC v. Flaherty that Kalshi had shown a reasonable chance of success on its argument that the Commodity Exchange Act preempts New Jersey laws purporting to regulate sports-related event contracts traded on a CFTC-licensed designated contract market.
The Third Circuit ruling was not unanimous. The majority found both field and conflict preemption likely applied to New Jersey’s attempt to regulate those contracts. The dissent argued that Kalshi’s sports-event contracts looked like gambling and could be subject to state regulation. That split illustrates why the issue has not been settled by one appellate decision.
New York went the other direction. On July 7, 2026, U.S. District Judge Analisa Torres ruled in KalshiEX LLC v. Williams that New York gambling laws, as applied to Kalshi’s sports-event contracts, were not preempted by the Commodity Exchange Act. The Southern District of New York concluded that Kalshi had not shown a clear or substantial likelihood of success on the merits of its preemption claim.
Those rulings leave Kalshi with a favorable Third Circuit decision, an adverse Southern District of New York ruling and active state litigation in Washington. For operators, the immediate result is not one national rule, but a jurisdiction-by-jurisdiction compliance problem shaped by each court’s view of federal derivatives law and state gambling authority.
What did Washington say Kalshi offered in the state?
The Washington Attorney General’s March complaint announcement focused on Kalshi’s availability to state consumers and its advertising. The office said Kalshi allowed users to bet on sports and elections, as well as other future events, and compared the structure to sportsbooks because users risk money on outcomes with payouts tied to whether the event occurs.
The Attorney General also cited Washington’s long-running restrictions on gambling and the 2006 amendment to the state Gambling Act addressing internet gambling. The state’s public statements describe Kalshi’s product as illegal gambling under Washington law regardless of the company’s federal exchange status.
Kalshi’s position is different. It has consistently described its listed products as event contracts traded on a regulated exchange under CFTC oversight. The CFTC’s 2020 designation order granted Kalshi contract-market status after the agency found the company had demonstrated its ability to comply with the Commodity Exchange Act and applicable CFTC regulations. That federal designation is the foundation of Kalshi’s argument that state gambling enforcement is displaced when the contracts trade on a designated contract market.
The Washington injunction therefore targets more than one company’s state access. It is a test of whether state consumer protection and gambling statutes can reach a federally licensed prediction market when the state views the same activity as wagering by residents inside its borders.
What happens next in Washington?
Kalshi is already fighting to preserve its Washington operations while the case continues. Law360 reported on July 27, 2026, that Kalshi asked a Washington judge to pause the preliminary injunction while it pursued an appeal, arguing that the order placed the company between state enforcement demands and its federal regulatory obligations.
The next phase turns on the final injunction terms in King County Superior Court and any stay or appeal ruling that determines whether Kalshi can keep offering the challenged contracts to Washington residents while litigation proceeds. Those orders will matter beyond Washington because they will add another data point to the developing split over state gambling enforcement and CFTC-regulated event contracts.
For the prediction markets industry, the stakes are immediate. A CFTC designation gives an exchange federal market status, but Washington’s preliminary injunction shows that state attorneys general are still pressing gambling and consumer protection theories against event-contract platforms. Until appellate courts converge on the preemption question, Kalshi’s legal exposure will continue to depend heavily on the state where a customer is located and the court hearing the next injunction fight.
