A Washington state judge has blocked Kalshi from offering sports event contracts to residents, ruling that the world’s largest prediction market runs illegal gambling under state law. Judge John McHale of King County Superior Court granted Washington’s motion for a preliminary injunction in an order filed Monday, and rejected Kalshi’s central legal argument that the federal Commodity Exchange Act overrides state gambling statutes. The order will not take effect until at least Aug. 5. Kalshi processed $33 billion in monthly trading volume in June and is currently raising capital at a valuation near $40 billion, so the ruling lands on one of the fastest-growing private companies in US financial markets.
A prediction market is an exchange where traders buy and sell contracts that pay a fixed amount if a specific real-world event happens, such as a team winning a game or a candidate winning an election.
Key takeaways
- Judge John McHale of King County Superior Court granted Washington’s preliminary injunction against Kalshi on Monday, finding the platform “offers illegal gambling activities to Washington consumers.”
- The judge wrote that the Commodity Exchange Act does not preempt Washington law, contradicting a Third Circuit ruling that reached the opposite conclusion in New Jersey.
- The injunction is stayed until at least Aug. 5, with both sides filing additional materials by Aug. 3.
- States have now won 19 of 23 judicial decisions on injunctions in prediction market cases, according to gaming attorney Daniel Wallach.
Published: July 21, 2026, 09:30 UTC
The ruling splits from a federal appeals court
McHale’s order puts a Washington trial court on the opposite side of a federal appeals court that examined the same question and reached the opposite answer.
The dispute turns on preemption. Kalshi is registered with the Commodity Futures Trading Commission as a designated contract market, and argues that federal commodities law gives the CFTC exclusive authority over event contracts, leaving states with no role. The Third Circuit accepted that reasoning in the New Jersey case, affirming an injunction that barred the state from enforcing its gambling laws against Kalshi.
McHale did not. “The public interests at stake and potential harm to consumers in the continued operation of Kalshi’s online gambling activities in the State of Washington outweigh harm to Kalshi,” he wrote, per the court document reported by The Block. He also found that the platform “solicits bets from Washington consumers.”
Kalshi disputes the premise. “States don’t have jurisdiction to regulate prediction markets,” a company spokesperson said. “We’re disappointed to see Washington state continue wasting taxpayer dollars.”
The map is shrinking
Washington would become the third state where Kalshi is barred from offering sports contracts, joining Nevada and Michigan.
Michigan Attorney General Dana Nessel secured a temporary restraining order on June 29. On July 8, US District Judge Analisa Torres in Manhattan denied Kalshi’s request to block New York from enforcing its gambling laws, holding that the Commodity Exchange Act does not supersede state rules as applied to sports event contracts. Washington Attorney General Nick Brown filed the underlying suit in March.
Daniel Wallach, a sports and gaming attorney, told The Block that 23 judicial decisions have now addressed preliminary injunctions or restraining orders in prediction market cases, and states have won 19 of them. “The tide is turning sharply in the states’ favor,” he said, adding that Kalshi’s map for sports contracts could look markedly different in six months.
What it means for the business
Sports contracts are the volume engine behind Kalshi’s valuation, which makes state-by-state exclusion a direct revenue problem rather than a legal footnote.
The company raised $1 billion in a Series F round in May at a $22 billion valuation, double the $11 billion mark it hit five months earlier, with backing from Coatue, Sequoia, Andreessen Horowitz and Paradigm. It is now seeking capital near $40 billion. Kalshi’s chief executive has said an IPO will not happen before 2027.
Volume is already cooling for cyclical reasons. Open interest across Kalshi and Polymarket fell 20% as World Cup betting wound down, according to data published July 20. Kalshi still cleared $33 billion in June against $13.95 billion for Polymarket and its US platform. Losing a state the size of Washington, with roughly 8 million residents, subtracts from that base at the moment the company is pricing a round.
Kalshi has spent 2026 building the compliance case for its own legitimacy, including a rule requiring traders to disclose employers to deter insider activity. State courts have so far treated that as beside the point.
The fight moves up the ladder
Resolution will come from a federal court, not a state one.
The CFTC sued New York in April seeking a declaratory judgment that federal law grants the agency exclusive authority over event contracts. That case, plus the conflict between the Third Circuit and courts in New York and Washington, sets up the kind of circuit split the Supreme Court takes. Wallach expects the question to reach the justices within a few years.
Congress could also settle it sooner. The Clarity Act moving through the Senate is aimed at digital asset market structure, and any statute that fixes the boundary between CFTC and state authority would apply to event contracts as well. Until then, Kalshi is litigating one state at a time and losing most of them.
Frequently asked questions
Is Kalshi shut down in Washington right now?
No. The preliminary injunction is stayed until at least Aug. 5. The court set an Aug. 3 deadline for additional materials from both Kalshi and the state, and invited the parties to confer on consumer protection measures before the order takes effect.
Why do courts disagree about whether states can regulate Kalshi?
The Commodity Exchange Act gives the CFTC exclusive jurisdiction over regulated futures products. Courts disagree on whether sports event contracts qualify as those products or as sports wagers dressed in a futures wrapper, which would leave them subject to state gambling law.
Does this affect Polymarket too?
Indirectly. Polymarket operates a separate US platform under its own CFTC registration and faces its own state scrutiny. A federal ruling that states may enforce gambling laws against CFTC-registered exchanges would apply to any prediction market offering sports contracts in the US.
