Washington State Becomes the 11th: Judge Rules Kalshi Likely Ran an Illegal Gambling Operation

King County Superior Court Judge John McHale granted Washington state a preliminary injunction against Kalshi on July 21, 2026, ruling that the prediction market platform likely ran an illegal gambling operation under Washington state law. McHale rejected Kalshi's argument that its status as a CFTC-designated contract market preempts state gambling enforcement — the same federal-preemption theory that succeeded in Arizona in May but has now failed in Michigan, Nevada, New York, and Washington. The ruling was requested by Washington's Attorney General after the Washington State Gambling Commission sent Kalshi a notice stating that offering event-based contracts was not authorized in the state — a notice Kalshi had, per court filings, ignored. McHale asked both sides to confer and present a compliance plan by the first week of August.

Washington is the 11th state to take active legal action against prediction market platforms and the fourth where a court ruling has gone against Kalshi. The pattern is now impossible to miss: every state-level court that has directly ruled on the CFTC-preemption question — Michigan's Judge Maloney in June, Nevada's First Judicial District in May, New York's Judge Torres in July, and now Washington's Judge McHale — has rejected the preemption argument and allowed state gambling enforcement to proceed. The lone exception remains Arizona, where a federal court granted the CFTC a preliminary injunction in May. The split between state and federal court outcomes reflects the underlying jurisdictional uncertainty: state courts applying state gambling law have consistently concluded that a CFTC license does not operate as a general exemption from state gambling rules, while the CFTC's own federal preemption theory prevailed only where the agency was the direct plaintiff.

McHale's specific framing — that Kalshi 'likely ran an illegal gambling operation' — is notable. Unlike the Michigan ruling, which turned primarily on whether event contracts are swaps under the Commodity Exchange Act, McHale appears to have reached the state-gambling-law conclusion directly, without extensive engagement with the swap definition question. That is a simpler analytical path that other state courts could follow: rather than engaging with federal derivatives law, a judge can hold that the activity is gambling under state definitions and that no federal license automatically exempts it. If that reasoning becomes the template, the litigation burden shifts significantly toward platforms, which would need to defeat a state-law gambling characterization in each of the states where cases are pending.

Washington joins a litigation map that now spans four time zones and four federal circuits. The practical effect for Kalshi users in Washington State remains unclear: McHale asked the parties to negotiate the specific terms of the injunction rather than imposing immediate access restrictions, meaning the enforcement mechanism is still being worked out. But the ruling adds legal pressure ahead of two hard deadlines: the Michigan geofencing deadline of August 12 (with a $500,000-per-day fine for non-compliance) and the Minnesota felony ban's August 1 effective date — unless Judge Menendez in Minnesota issues the platforms a preliminary injunction before then.

Operators mentioned in this article

CFTC-regulated

Kalshi

First fully CFTC-regulated US event-contract exchange.

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