Washington Court Forces Kalshi to Restrict Prediction Markets

Kalshi, a federally regulated prediction market platform, has been ordered by a Washington state court to halt most of its event-based contracts for users in the state. The ruling, issued August 13, found that Kalshi likely violated Washington's gambling laws by offering contracts on a wide range of real-world events. The court's final order requires Kalshi to geofence Washington residents from accessing restricted markets and to stop advertising those products to state consumers.

Scope of the Ban

The court's order covers prediction markets tied to sports, elections, politics, entertainment, culture, technology, science, and so-called "mentions." Kalshi may continue to offer contracts related to commodities, climate, economics, and finance, which are not included in the restriction. The court set two compliance deadlines: by August 19, Kalshi must implement an IP and residency-based geofence, and by September 2, a broader multi-source geofencing system must be in place. The court also determined that marketing illegal gambling products constitutes an unfair or deceptive practice under state law.

State and Federal Regulatory Tensions

Washington's enforcement action is part of a broader trend of state-level scrutiny targeting prediction markets. Several states have argued that Kalshi's event contracts, especially those involving sports outcomes, amount to illegal gambling under local statutes. Kalshi, for its part, maintains that its operations fall under the exclusive jurisdiction of the Commodity Futures Trading Commission (CFTC), which it argues should preempt state gambling laws. The legal standoff highlights the unresolved question of whether federally regulated prediction markets can operate nationwide or must comply with each state's gambling framework.

Broader Legal Pressure

On the same day as the Washington order, Baltimore filed a separate lawsuit against Kalshi and rival platform Polymarket, alleging illegal gambling activity. That case also names major trading platforms Coinbase, Robinhood, and Webull as defendants. The mounting legal actions underscore the uncertain regulatory environment for prediction markets in the U.S., where state and federal authorities continue to test the boundaries of their oversight. This regulatory friction echoes the kind of network-level governance debates seen in other parts of the crypto sector, such as the recent push by Solana validators to accelerate token burns as a way to influence network economics.

According to court documents, Washington Attorney General Nick Brown alleged that Kalshi had profited from wagers on sports, elections, natural disasters, and geopolitical events. The court's order extends a preliminary injunction first granted in July. Kalshi's request for a stay was denied by the Washington Court of Appeals. As of publication, Kalshi had not responded to requests for comment.

According to CFTC data, Kalshi is one of the few prediction market platforms registered as a designated contract market in the U.S. As of August 2026, Kalshi's platform supported contracts on a range of topics, with open interest in event-based markets exceeding $10 million nationwide. The company's compliance with state-level restrictions could materially reduce its user base and trading volume in affected jurisdictions.

Prediction markets allow users to trade contracts based on the outcome of future events, with prices reflecting the collective probability assigned by market participants. While proponents argue that these markets provide valuable forecasting data and risk management tools, critics warn that they can blur the line between regulated derivatives and unlicensed gambling. The regulatory status of prediction markets remains unsettled in the U.S., with federal oversight by the CFTC sometimes clashing with state-level gambling prohibitions. For users, this means that access to event-based trading products may depend on both their physical location and the evolving legal landscape.