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, ruling the prediction market platform likely operated an illegal gambling operation under state law. McHale rejected Kalshi's CFTC-preemption defense. He asked both sides to present a compliance plan by the first week of August. Washington is the 11th state to take legal action — and the fourth where a court has ruled against Kalshi, after Michigan, Nevada, and New York.
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
Recent updates
Kalshi's Parlays Drive Back-to-Back $5B Days — and Hand Critics Their Strongest Argument
Kalshi traded a record $5.33 billion on November 7 and $5.36 billion on November 8, with multi-leg parlay-style 'combos' making up roughly 75% of both days' volume. Its 30-day volume topped $100 billion. But the parlay dominance cuts against the platform's legal defense: parlays are a quintessential sportsbook product, and the American Gaming Association has told the Second Circuit that parlays make up about two-thirds of Kalshi's volume and should be treated as sports bets. The implied house edge on 10-plus-leg combos is around 25%, undercutting the argument that these are neutral financial instruments rather than gambling.
Cruz Bill Would Require State or Tribal Approval for Sports Contracts — a Bipartisan Legislative Threat Emerges
Senator Ted Cruz, who chairs the Senate Commerce Committee, is preparing a bill that would bar federally regulated prediction markets from offering gambling-tied event contracts, including sports, unless a state or tribal government authorizes them. It would not ban the contracts nationwide but would require platforms to obtain approval jurisdiction by jurisdiction, resembling state-by-state sportsbook regulation. The proposal arrives as Democrats take control of both chambers after the midterms, creating a potential bipartisan reckoning: a Republican committee chair and a newly skeptical Democratic majority both eyeing restrictions on a sector that had relied on federal protection.
CFTC Tells Platforms to Stop Geofencing States — Directly Colliding With State Court Orders
The CFTC issued an interpretation on November 5 of its 'impartial access' core principle, telling regulated exchanges including Kalshi and Polymarket to drop state-by-state geographic blocks within 30 days or explain why they cannot. The demand collides head-on with existing state court orders that require the platforms to geofence: Washington ordered Kalshi to geofence in August, and Michigan ordered it to use licensed geolocation to block the state in September, with a $500,000 daily fine for violations. Chairman Michael Selig framed the interpretation as a uniformity requirement. The platforms are now caught between a federal demand to unblock states and state court orders to block them.