A King County Superior Court judge has ordered prediction market exchange Kalshi to geofence Washington state users out of most of its contract categories by September 2 or pay $120,000 for every day it misses the deadline. Judge John McHale entered the final order on August 12 and denied Kalshi’s request to pause it during appeal, according to the Washington Attorney General’s office. The ruling landed two days after the Commodity Futures Trading Commission invoked emergency authority to keep the same exchange trading, setting up the sharpest state versus federal collision yet over whether event contracts are derivatives or gambling.
A prediction market is an exchange where users buy and sell contracts that pay out based on whether a specific real-world event happens, with the contract price acting as an implied probability.
Key takeaways
- Kalshi must block Washington users from sports, elections, politics, entertainment, culture, tech and science, and “mentions” contracts.
- An IP and residency geofence was due August 19, with a multi-source system required by September 2.
- Missing the September 2 deadline triggers a $120,000 per day penalty, matching what Nevada regulators sought in a June contempt motion.
- The order came two days after the CFTC used emergency powers to order Kalshi to keep trading.
Published: August 16, 2026, 09:00 UTC
What the Washington order actually blocks
The order bars Kalshi from offering, accepting, or facilitating contracts in seven categories inside Washington: sports, elections, politics, entertainment, culture, tech and science, and “mentions,” which are contracts on whether a named public figure will say specific words. Kalshi can keep running markets on commodities, climate, economics, and finance in the state, and existing holders may close out positions in the restricted categories.
The court also barred Kalshi from advertising the covered contracts in Washington, finding that marketing illegal gambling counts as an unfair or deceptive practice under the state Consumer Protection Act. The state’s complaint, filed in March by Attorney General Nick Brown, points to a Kalshi promotional post in which a user tells a friend they “found a way to bet on the NFL even though we live in Washington.”
McHale wrote that Kalshi “willfully ignored” a December 2025 notice from the Washington State Gambling Commission stating that event-based contracts are not authorized in the state. He concluded that consumer harm outweighed the injunction’s cost to the company. This is the second adverse ruling for Kalshi in Washington in under a month, following the July 20 preliminary injunction that W3BN covered when the Washington court first blocked Kalshi sports event contracts.
The CFTC is telling Kalshi the opposite thing
Kalshi is now holding two orders that point in different directions. Two days before the Washington order, the CFTC invoked emergency authority to require the exchange to keep trading in line with the Commodity Exchange Act’s core principles, acting on Kalshi’s own notification of a market emergency after New York sued it. The federal position is that event contracts are interstate derivatives under exclusive CFTC jurisdiction. Washington’s position is that staking money on a contingent outcome meets the state’s statutory definition of gambling regardless of what the contract is called.
The CFTC has sued nine states over the question, starting with Illinois, Arizona, and Connecticut and continuing through Wisconsin and Minnesota, which it sued within hours of that state’s ban taking effect. President Donald Trump has publicly backed the agency against state gaming regulators.
Kalshi has fared worse in state court than its federal ally has in federal court. A Washington Court of Appeals commissioner denied an emergency stay on August 10, and McHale denied his own stay two days later. Spokesperson Jacki McGavick said the company “respectfully disagrees” with the decision and is weighing legal options, restating that the CFTC “has exclusive jurisdiction” over the exchange. Kalshi brought in former acting US Solicitor General Neal Katyal for the appeal.
Why the September 2 date matters for the whole sector
The order converts an abstract preemption argument into a compliance engineering deadline with a price tag attached. Kalshi has roughly two weeks to stand up multi-source geofencing across seven categories, and the $120,000 daily figure is the same number Nevada gaming regulators asked a court to impose in a June contempt motion. Two states now anchoring penalties at the same rate gives other attorneys general a template.
The exposure is not limited to Kalshi. Robinhood has sued Washington to block enforcement of the same gambling statutes against prediction markets, and Polymarket faces its own state-level scrutiny after JPMorgan cut its banking relationship over regulatory concerns. Any state court willing to reject the preemption defense creates a patchwork where a nationally licensed exchange has to run different product menus by ZIP code.
Kalshi’s remaining state options are asking a full Court of Appeals panel to review the commissioner’s ruling or seeking emergency review at the Washington Supreme Court. Neither is likely to resolve before September 2, which means the company either geofences on schedule or starts accruing penalties while it appeals.
The timing also collides with Washington politics. Trump and CFTC Chair Selig are expected at a White House meeting with crypto and prediction market executives on Wednesday, a session that now happens with a state court order and a federal emergency order pointing in opposite directions.
Frequently asked questions
Can Washington residents still use Kalshi?
Yes, but only for markets on commodities, climate, economics, and finance. Sports, elections, politics, entertainment, culture, tech and science, and “mentions” contracts must be geofenced. Existing positions in the restricted categories can be closed out.
What happens if Kalshi misses the September 2 deadline?
The order sets a $120,000 per day penalty. Kalshi can file an affidavit explaining any delay and ask the court to determine a final figure, so the amount is not automatic, but the exposure starts accruing on September 3.
Why do the CFTC and Washington state disagree?
The CFTC treats event contracts as interstate derivatives under its exclusive jurisdiction. Washington treats each contract as a wager on a contingent event, which meets its statutory definition of gambling. No federal appellate ruling has settled which reading controls.
