A lawsuit in Washington state court seeks to clarify prediction markets as violating state law and block Washingtonians’ access to the exchanges.
Washington attorney general Nick Brown has escalated state action toward Kalshi’s prediction market offerings, asking the King County Superior Court to declare the exchanges illegal in Washington. Brown’s complaint reinforces an earlier statement from gambling regulators in Washington and follows a federal court decision that was unfavorable toward the interests of entities like Kalshi in the northwestern part of the United States.
Lawsuit escalates Washington’s stance toward event contract exchanges
Brown announced his filing on March 27, stating that Kalshi “violates state law by operating and advertising an online platform where users can bet on sports, elections, and other events.” The complaint claims that Kalshi’s “operations violate numerous provisions of Washington’s Gambling Act, as well as the Consumer Protection Act and the Recovery of Money Lost at Gambling Act.”
Supporting those claims is the assertion that Kalshi’s markets “meet every element of the definition of gambling under state law.” Additionally, the complaint argues that “Kalshi encourages gambling and potential addiction by including features on its apps that are designed to encourage continued engagement, attention, and betting.”
As relief, the lawsuit asks the court to take several actions, including.
- decree that Defendant’s operation of gambling activities, as described above, violates Washington’s Gambling Act
- decree that Defendant’s conduct complained of herein constitutes unfair or deceptive acts or practices and is unlawful in violation of the Consumer Protection Act
- issue a permanent injunction…from continuing or resuming the unlawful conduct complained of herein
- make such orders as necessary to recover all money Washingtonians have lost at illegal gambling and/or activities through Defendant
- assess civil penalties
This complaint follows a December 2025 consumer notice from the Washington State Gaming Commission. That advisory also characterized prediction markets as illegal under state law and reminded residents that legal wagering in Washington is restricted to physical casinos operated under tribal gaming compacts.
It’s critical to note that this complaint is in state court, not federal. Brown’s filing did come shortly after an important development in a relevant federal court, though.
Ninth Circuit decision to refuse stay preceded Washington AG lawsuit
While a federal appeals court has yet to rule on the merits of any case involving the legality of prediction markets, the Ninth Circuit Court of Appeals’ decision to refuse a request for an emergency injunction against another state taking action against Kalshi points to a long road ahead for exchanges in litigation at that level. Kalshi sought the injunctive relief to prevent a Nevada state court from barring Kalshi’s operations in that state.
That denial followed a federal district court ruling leaving the dispute between Kalshi and the Nevada Gaming Control Board in state court. The Nevada district court will hear oral arguments on April 3.
The Ninth’s decision to not act on the matter at this time could have shored up Brown’s confidence in filing his lawsuit, as Washington is part of the Ninth’s jurisdiction. However, that might not be the last time the Ninth sees requests for its intervention.
Washington action sets the Ninth up for more potential prediction markets litigation
If the Nevada Gaming Control Board and/or Brown are successful in their legal pursuits in their respective states, that could be the catalyst to thrust the federal preemption issue upon federal courts for those states. Preemption refers to federal law outweighing state statutes.
Kalshi has leaned heavily upon that legal concept, arguing that its regulation by the United States Commodity and Futures Trading Commission (CFTC) supersedes all potentially applicable state standards across the US. The CFTC has echoed that sentiment, most poignantly in an amicus brief to the Ninth to support Kalshi’s request for injunctive relief against Nevada gaming regulators.
Many dominoes will have to fall before the Ninth could weigh in on whether federal preemption protects Kalshi’s operations and to what extent, but that seems to be the destination this sequence is headed toward at this point. Brown’s lawsuit is another example of the writing on the wall for that inevitability.
