Washington state prosecutors secured a major legal victory against prediction market Gizmodo after a state judge issued a final order barring the platform from offering most types of betting within the state. King County Superior Court Judge John McHale sided with the state attorney general’s office, ruling that the platform operates an illegal gambling site without a license from the state’s Gambling Commission.
Judge Orders Kalshi to Halt Sports and Election Betting in Washington State
The court order applies to wagers related to sports, elections, politics, entertainment, culture, technology, science, and specific word mentions. Under the terms of the ruling, Kalshi must implement a geofence by Sept. 2, 2026, and faces penalties of $120,000 for each day it continues operating without a geofence past that deadline. Wagers on commodities, climate, economics, and finance remain exempt from the restriction.
McHale concluded that Kalshi’s operations risk money, rely partly on chance, and promise payouts to winners while earning transaction fees on each placed bet. The judge also found that the company’s advertisements were likely to trick reasonable consumers into believing Washington permits online gambling, whereas virtually all betting outside tribal land is illegal in the state.
Kalshi Defends Operations Under Federal Jurisdiction While Facing National Scrutiny
Kalshi has consistently maintained that it is not subject to state-level regulations, arguing instead that the U.S. Commodity Futures Trading Commission holds exclusive jurisdiction over its exchange. A Kalshi spokesperson stated that the company respectfully disagrees with the court’s decision and is considering all legal options.
The Washington ruling is part of a broader, multi-state legal battle involving state regulators, federal authorities, and prediction platforms. Similar legal clashes have unfolded across the country. In Connecticut, Federal Judge Vernon Oliver rejected a request from Kalshi to block the state’s Department of Consumer Protection from applying sports betting regulations to the platform’s predictive markets. Meanwhile, the CFTC has ordered Kalshi to continue operating in New York and Michigan despite state lawsuits alleging illegality.
Legal Arguments and the Debate Over ‘Event Contracts’
Legal battles in multiple states have focused on how Kalshi structures its offerings. While the platform describes its products as financial derivative contracts or swaps tied to real-world events—similar to agricultural hedging tools used by farmers—judges have routinely rejected that framing. In the Connecticut case, Judge Oliver wrote that Kalshi’s sports-related event contracts ultimately function as sports wagers rather than financial impacts.
In Massachusetts, attorney Grant Mainland argued before the state’s Supreme Judicial Court that Kalshi is an exchange exempt from state oversight. That argument faced skepticism from the bench, following an earlier lower court ruling by Judge Christopher Barry-Smith that found Kalshi was operating as an unlicensed sportsbook.
As state and federal courts grapple with the regulatory status of prediction markets, critics and lawmakers have raised concerns about consumer protection, problem gambling, and reports of insider trading on these platforms. Despite the mounting state-level restrictions, Kalshi recently secured a $1 billion Series F funding round, pushing its valuation to $22 billion.
