Kalshi Loses Another Court Battle — Washington State Rules Its Contracts Are ‘Illegal Gambling’
Kalshi’s legal battle with US state regulators took another turn Monday evening after a Washington state court issued a preliminary injunction against the prediction market platform, finding that it conducts “illegal gambling activities” in violation of gambling laws. The ruling was reported by attorney Daniel Wallach, who has been tracking Kalshi’s legal developments closely on X (formerly Twitter).
Here Is What the Court Actually Found
The court’s findings were direct. Kalshi operates an online betting platform where consumers place bets, the court found, and the company knowingly accepts and receives money from Washington consumers through that platform. By facilitating wagers and collecting fees, the court said, Kalshi profits from its betting operation.
The ruling also targeted the company’s marketing — finding that Kalshi’s advertisements claiming to offer “legal betting” in Washington State are likely to mislead a reasonable consumer into believing those gambling activities are lawful under state law.
BREAKING: Washington state court issues preliminary injunction against Kalshi, finds that the company conducts illegal gambling activities in violation of Washington State gambling laws and that the Commodity Exchange Act does not preempt state gambling laws. pic.twitter.com/pwJeDmYbD5
— Daniel Wallach (@WALLACHLEGAL) July 21, 2026
On the central legal question — whether the Commodity Exchange Act, which grants the Commodity Futures Trading Commission (CFTC) exclusive jurisdiction over certain derivatives markets, prevents states from enforcing their own gambling laws against Kalshi — the Washington court sided firmly with the state.
The court found that the grant of exclusive jurisdiction to the CFTC was not intended to exclude state regulation of gambling but rather to separate the CFTC’s functions from those of other federal agencies and consolidate federal oversight of commodity futures trading in one place.
Regulation of gambling and regulation of futures markets, the court concluded, are different fields of regulation — and Washington retains full authority to enforce its gambling laws within its own borders.
Two More Arguments, Two More Losses
Wallach reported that the court also rejected Kalshi’s argument that complying with Washington state law would force it to discriminate against Washington residents by excluding them from its platform — an argument the company has raised in multiple jurisdictions.
The Washington court called it a “bogus impartial-access argument,” finding that an inability to match Washington traders with traders from other states does not constitute discrimination in the way federal law prohibits. Complying with Washington law, the court said, would not prevent Kalshi from complying with applicable federal law.
On the question of public interest, the court was equally clear. The potential harm to consumers from allowing Kalshi to continue operating illegal gambling activities in Washington outweighs any harm to the company from the injunction.
Kalshi’s Legal Battles Across the US
The Washington ruling is the latest addition to a growing list of state-level legal setbacks for Kalshi. As CryptoDepth has reported, a Michigan court directed Kalshi to cancel previously executed trades — a directive the CFTC stepped in to block last week, ordering Kalshi not to comply and asserting exclusive federal authority over the exchange’s operations.
Judge Analisa Torres, the federal judge who presided over the Ripple Labs securities case, denied Kalshi a preliminary injunction in the Southern District of New York earlier this month, ruling that New York’s gambling laws apply to its sports event contracts.
Additionally, Arizona has filed criminal charges against the platform. Massachusetts banned it from offering sports-related markets altogether.
As a result, the CFTC has filed lawsuits against nine states — Arizona, Connecticut, Illinois, Kentucky, Minnesota, New Mexico, New York, Rhode Island, and Wisconsin — in an effort to protect Kalshi’s federal operating status.
The core question driving every one of these cases is the same — whether the prediction platform’s contracts are financial instruments governed exclusively by federal commodity law or sports bets subject to state gambling regulation.
Featured image generated with OpenArt.