A Washington state judge has ordered prediction market operator Kalshi to stop offering most of its event contracts in the state, ruling that the products likely constitute illegal gambling under Washington law.

The decision rejects the argument that federal commodities law pre-empts the state's gambling rules, and it marks the latest setback for Kalshi as U.S. states challenge the company's position that its federally regulated event contracts fall under federal commodities law rather than state gambling statutes. Kalshi's marketplace operates under the oversight of the U.S. Commodity Futures Trading Commission (CFTC), the federal derivatives regulator, and its contracts let users trade on the outcomes of real-world events — the basis of the company's argument that it runs a financial exchange rather than a gambling venue.

The preliminary injunction — an interim court order — requires Kalshi to restrict Washington users from trading the affected contracts, escalating a broader regulatory fight over whether prediction markets should be treated as financial products or gambling services. The distinction carries practical consequences: state gambling regimes typically impose their own licensing, taxation, and consumer-protection requirements, while products under federal derivatives oversight are regulated as financial instruments. Because the order is preliminary, the underlying legal questions remain to be fully litigated as the case proceeds.

"We're holding Kalshi accountable for running an illegal gambling operation," Washington Attorney General Nick Brown said, citing a recent court ruling.

Scope of the Injunction

The ruling bars Kalshi from offering contracts tied to:

• Sports
• Elections
• Politics
• Entertainment
• Culture
• Tech and science
• "Mentions"

Contracts exempt from the ruling include commodities, climate, economics, and finance — the categories closest to the traditional subject matter of derivatives markets.

Similar Challenges in Other States

Kalshi has faced similar challenges elsewhere, including in Nevada, where the company is disputing regulatory action over its failure to fully geofence its platform — the practice of restricting access based on users' locations.

Wider Implications

The disputes come as prediction markets have expanded rapidly beyond politics into sports, economic indicators and other real-world events, drawing growing scrutiny from state regulators and lawmakers.

The Washington case could have wider implications for Kalshi and rivals such as the crypto-based platform Polymarket as U.S. authorities continue to debate the boundary between federally regulated event contracts and state-regulated gambling.

Source: BitcoinKE