King County Superior Court Judge John McHale granted Washington’s request for a preliminary injunction against Kalshi, finding the state is likely to succeed in showing that the company’s event contracts violate state gambling and consumer protection laws.
In a 14-page order filed Monday, McHale rejected Kalshi’s federal preemption arguments. “The Commodity Exchange Act (CEA) does not preempt Washington State gambling law,” the judge wrote, finding that Kalshi could comply with both federal and state requirements.
The ruling does not yet spell out all of the restrictions Kalshi will face in Washington. McHale immediately ordered the company to preserve records tied to Washington consumers, but said the court intends to issue another order “laying out other specific terms of the Preliminary Injunction by August 5, 2026.” The parties must submit agreed or competing proposed terms by noon Aug. 3.
Kalshi signaled it intends to continue fighting the case. In a statement posted on X, spokesperson Jacki McGavick said states “don’t have jurisdiction to regulate prediction markets” and argued that courts, “including the Third Circuit,” have already recognized that principle.
Washington sued Kalshi over alleged illegal gambling
Washington Attorney General Nick Brown filed the underlying lawsuit against Kalshi on March 27, accusing the company of offering unlicensed online gambling to state residents through its event contracts. The complaint alleges Kalshi’s sports, political, election and other markets violate Washington’s Gambling Act, Consumer Protection Act and Recovery of Money Lost at Gambling Act, which allows certain losses from illegal gambling to be recovered through civil litigation.
Washington is also seeking restitution for consumers, disgorgement of money allegedly obtained through unlawful conduct and civil penalties for each violation of the Consumer Protection Act. The state has additionally asked Kalshi to provide an accounting of money collected from and paid to Washington consumers. McHale’s preliminary finding that Washington is likely to succeed on its claims could strengthen the state’s effort to obtain those remedies, though the court has not yet awarded them.
Kalshi immediately removed the case from King County Superior Court to federal court, arguing in its notice of removal that the dispute raised substantial federal questions because its contracts are regulated under the CEA. U.S. District Judge John Coughenour rejected that jurisdictional argument in a May 5 remand order, finding that Washington’s complaint sought to enforce state gambling laws and that Kalshi had not established a basis for federal jurisdiction.
Kalshi appealed the remand order and sought to keep the case in federal court while that challenge proceeded, but the Ninth Circuit denied its stay request. The case was returned to King County Superior Court on May 22, clearing the way for Washington’s preliminary injunction motion to proceed.
Judge finds CEA leaves room for state gambling enforcement
Kalshi argued that the CFTC’s exclusive jurisdiction over transactions conducted on DCMs prevents states from applying their gambling laws to contracts offered on its exchange. McHale disagreed, finding that Congress adopted the provision to divide federal regulatory responsibilities rather than displace state authority.
The grant of exclusive jurisdiction was intended to “separate the functions of the [CFTC] from those of the [Securities and Exchange Commission] and other regulatory agencies” and consolidate federal oversight of commodity futures trading in one agency, McHale wrote, quoting the U.S. Supreme Court’s 1982 decision in Merrill Lynch v. Curran. He also pointed to language in the CEA stating that nothing in the law supersedes or limits the authority of state regulators or state courts.
“The language referenced above indicates that Congress did not intend to supersede or limit States in regulating gambling,” McHale wrote.
McHale also pointed to the CEA provision allowing the CFTC to review event contracts involving gaming or “activity that is unlawful under any Federal or State law.” That language, he wrote, “demonstrates that States retain the authority to determine what is unlawful under applicable State law,” meaning contracts could legally be available in some states but not others.
Court rejects impartial access argument
Kalshi also argued that preventing Washington residents from trading on its exchange would violate the CFTC’s impartial access rule, which requires DCMs to apply access standards in an impartial and nondiscriminatory manner. Kalshi and the CFTC have argued that the rule prevents federally regulated exchanges from restricting access to contracts based on where customers live.
McHale found that the rule governs how exchanges treat their members, traders and software providers, rather than requiring contracts to be available in every state. Excluding Washington customers to comply with state gambling law would therefore not amount to unlawful discrimination, he concluded.
“Required compliance with the law of the State of Washington as to gambling is not unlawful denial of access,” McHale wrote. “The impartial access rule does not require Kalshi to violate state law.”
Washington becomes fourth state to secure court-ordered restrictions
Washington is the fourth state to obtain court-ordered restrictions against Kalshi, joining Massachusetts, Nevada and Michigan. The orders do not resolve the underlying lawsuits, which remain ongoing, but they can restrict Kalshi’s operations while the cases proceed.
Nevada’s injunction is currently in effect and blocks state residents from opening new positions in Kalshi’s sports, election and entertainment markets. Kalshi has appealed but has not obtained relief that would suspend the restrictions during the appeal. Michigan’s extended temporary restraining order is also currently preventing customers in the state from trading sports event contracts while requiring Kalshi to implement court-approved geolocation controls.
Massachusetts also obtained a preliminary injunction that would block Kalshi from offering sports event contracts without a state gaming license, but the Massachusetts Appeals Court stayed the order while Kalshi’s appeal proceeds. The restrictions therefore have not taken effect.
In Washington, the court will next settle the injunction’s specific terms, determining which contracts Kalshi must restrict and how it must block access by Washington customers while the lawsuit continues. Kalshi has not yet announced an appeal but is likely to appeal and seek a stay given its challenges to similar state-court orders elsewhere. Unless Kalshi obtains a stay, the restrictions contained in McHale’s forthcoming order would remain in effect while the state pursues a final ruling on its gambling and consumer protection claims.
