Prediction market platform Kalshi faces a fresh legal blow after Washington state filed a lawsuit on Friday, alleging its event-based contracts amount to illegal gambling. The move follows similar actions in Nevada and Arizona, signaling escalating state-level scrutiny on the industry.
Washington alleges Kalshi operates as unlicensed sportsbook
Washington Attorney General Nick Brown said in the complaint that Kalshi's website and app allow consumers to place money on future events and receive payouts based on outcomes, functioning like a sportsbook. The statement read: "Kalshi's website and app show consumers a range of events that they can bet on and the odds for those various events, which dictate how much the bettor will be paid out if the event occurs." The state charged that Kalshi violated the Washington Consumer Protection Act, the Gambling Act, and the Recovery of Money Lost at Gambling Act, citing the state's ban on online gambling and strict control over the gaming market.
Kalshi swiftly moves case to federal court
Kalshi immediately filed to transfer the case to federal court, arguing in its motion that the issues raised in Washington are already being litigated in other federal courts and that the state gave "no warning or dialogue" before suing. The company contends that the U.S. Commodity Futures Trading Commission has exclusive authority over its event contracts.
Earlier this month, a Nevada judge temporarily blocked Kalshi from operating in the state after finding regulators likely to succeed. Days later, Arizona Attorney General Kris Mayes announced charges against Kalshi for operating an illegal gambling business without a license and offering illegal election wagering.
Growing legal pressure across U.S. states
All three lawsuits emerged shortly after Kalshi received CFTC approval for election contracts. While federal regulators have signaled openness to innovation, state authorities are increasingly skeptical that prediction markets escape gambling definitions. The Washington case adds to the mounting legal challenges facing Kalshi, which is now fighting on multiple fronts. No court ruling on the Washington lawsuit has been issued.