Washington Judge Blocks Kalshi Sports Contracts With Preliminary Injunction

Key Highlights

Court Sides With Washington Regulators

On July 20, King County Superior Court Judge John McHale granted a preliminary injunction against Kalshi, temporarily restricting the prediction market operator from offering sports-related event contracts in the state.

McHale approved Washington’s motion after deciding the state is likely to succeed in its case. Following the lead of several other states that have taken action against prediction markets, state regulators contend that Kalshi’s sports contracts qualify as gambling under Washington law and can’t be offered without the licenses and regulatory approvals required for sports wagering operators.

The court also found that allowing the contracts to continue could harm consumers. McHale determined that the public interest and risks tied to continued unlicensed gambling activity outweighed the potential harm an injunction could cause Kalshi.

The ruling isn’t a final judgment. It limits Kalshi’s sports market activity while the lawsuit continues. Players in the Pacific Northwest state can continue using Kalshi for non-sports-related contract trading as well as state-licensed sportsbooks and Washington online casinos.

Kalshi’s Federal Defense Falls Short

Kalshi argued that its event contracts are federally regulated under the Commodity Exchange Act. The company, which operates as a designated contract market overseen by the Commodity Futures Trading Commission (CFTC), claimed that this framework prevents Washington from applying state gambling laws to its platform.

McHale rejected that argument at the preliminary stage. His ruling indicates that federal commodities regulation doesn’t automatically protect Kalshi from state laws governing conduct traditionally regulated as gambling. That conclusion is a setback for the company’s position that CFTC oversight gives the federal government exclusive authority over its sports event contracts.

The case centers on whether sports contracts offered through a federally regulated exchange are financial derivatives or sports wagers subject to state control. 

The Next Steps

The preliminary injunction won’t immediately take effect in its final form. Washington and Kalshi must submit proposed language outlining the order’s specific requirements.

Those submissions are due by August 3, and the injunction is expected to take effect no earlier than August 5. The court will review both proposals before deciding how Kalshi must restrict access to sports event contracts in Washington.

Kalshi may challenge the ruling as the case proceeds or seek appellate review. The company continues to argue that federally regulated prediction markets shouldn’t be treated like sports betting sites.

For Washington, the ruling is an early legal victory in its effort to stop Kalshi from offering sports-based contracts without meeting state gambling requirements. The outcome could affect similar disputes involving federal commodities regulation and state gaming authority.