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Washington has become the latest state to win an early court victory against prediction market operator Kalshi, with a King County Superior Court judge finding that the company is likely violating the state’s gambling laws and rejecting its argument that federal commodities law blocks state enforcement.
The preliminary injunction, filed Monday, concludes that Washington is likely to prevail on the merits of its claims against Kalshi, although the order will not take effect immediately. The court delayed implementation until at least Aug. 5 while both sides submit proposed language defining the injunction’s scope and how it should be enforced.
At the center of the dispute is whether Kalshi’s sports event contracts fall exclusively under the federal regulatory framework established by the Commodity Exchange Act (CEA) or whether states retain authority to treat those contracts as unlawful gambling when offered to residents.
The Washington court sided, at least for now, with the state’s view.
Court Draws a Line Between Gambling and Futures Regulation
In one of the order’s most consequential legal conclusions, the judge determined that gambling regulation and futures market regulation occupy separate legal fields. The court reasoned that allowing Washington to enforce its gambling statutes against activities that qualify as gambling under state law would not interfere with Congress’s objective of creating a nationally uniform system for regulating legitimate futures markets under the CEA.
That conclusion cuts directly against Kalshi’s primary defense, which has centered on federal preemption. The company has argued in multiple lawsuits that, because it operates as a Commodity Futures Trading Commission-regulated designated contract market, states cannot prohibit contracts approved for trading under the federal commodities regime.
Washington persuaded the court that its lawsuit targets something different. Rather than attempting to regulate commodity exchanges themselves, the state is seeking to enforce its longstanding prohibition on sports gambling.
The distinction closely follows the analytical framework adopted by the U.S. Supreme Court in Oneok, Inc. v. Learjet, Inc. In that decision, the Court explained that the target of a state law is central to determining whether federal law preempts it. Here, the trial court viewed Washington’s gambling laws as regulating gambling conduct rather than the operation of federally regulated futures exchanges.
The ruling adds Washington to a growing list of states that have secured preliminary injunctions against Kalshi. Massachusetts, Nevada and Michigan have also obtained similar relief as litigation over sports event contracts expands across the country.
Although significant, the decision is not a final judgment. A preliminary injunction reflects the court’s conclusion that the state has shown a likelihood of success and that temporary relief is appropriate while the case proceeds. Kalshi can appeal the ruling while continuing to litigate the underlying claims.
Attention now shifts to the mechanics of compliance. The parties have until Aug. 3 to submit proposals addressing the wording and scope of the injunction, with the timing and method of geofencing Washington users expected to become one of the final contested issues before the order takes effect.
The Washington decision adds further momentum to a growing legal debate over whether sports event contracts listed on federally regulated exchanges are financial derivatives governed exclusively by federal law or, in substance, sports wagers that remain subject to state gambling prohibitions. With trial courts increasingly weighing in on both sides of the issue, the question appears increasingly likely to be settled by appellate courts.
