Washington State Sues Prediction Market Kalshi Over Alleged Illegal Gambling

Kalshi is a Commodity Futures Trading Commission-regulated designated contract market where users trade yes-or-no event contracts that settle at a maximum of $1. The New York State Gaming Commission argues that sports contracts constitute gambling subject to state law. The dispute centers on whether the federal Commodity Exchange Act preempts state enforcement and could also affect the platform’s cost of operating across state lines.

On July 7, 2026, U.S. District Judge Analisa Torres of the Southern District of New York denied Kalshi’s motion for a preliminary injunction. She found that the company had not sufficiently shown that federal law preempted New York’s gambling laws and that the associated compliance costs did not constitute irreparable harm. Kalshi filed a notice of appeal the same day, and the case entered the U.S. Court of Appeals for the Second Circuit on July 8 under docket number 26-1835.

Kalshi offers event contracts as a designated contract market regulated by the US Commodity Futures Trading Commission (CFTC). The central legal question is whether contracts allowing users to trade on outcomes are federally regulated derivatives or sports betting products subject to state oversight. The rulings will determine whether prediction markets can operate nationwide.

In early July 2026, Kalshi failed to secure a Nevada Supreme Court stay of an order blocking trading in the state, while a Michigan court issued a separate two-week temporary restraining order. The company also sued Ohio regulators and mounted a legal defense in Minnesota. North Carolina’s proposed budget would impose a 6% tax on related revenue, while Kalshi’s deadline to appeal in New Jersey was extended to August 4.

Kalshi offers event contracts that allow users to trade on sports outcomes and maintains that it is federally regulated by the U.S. Commodity Futures Trading Commission. Massachusetts Attorney General Andrea Joy Campbell sued the company in September 2025, arguing that the trades are effectively sports betting and require a license from the Massachusetts Gaming Commission. The case will determine whether federal derivatives regulation preempts state gambling laws.

Massachusetts Suffolk County Superior Court Judge Peter Krupp on June 30, 2026, allowed the state to file a 71-page amended complaint. The new allegations say Kalshi targeted people under 21 through social media and college-campus marketing while allowing customers aged 18 and older to open accounts and buy sports event contracts. The court had issued a preliminary injunction in January 2026 barring the platform from offering such contracts in Massachusetts while the case proceeds.

Kalshi is a prediction market regulated by the U.S. Commodity Futures Trading Commission that allows users to trade contracts on event outcomes. The company argues that its products are financial swaps, while Michigan considers its sports contracts to be unlicensed online gambling. The dispute centers on whether federal financial regulation can preempt state gambling laws and also raises questions about consumer protection and gambling tax revenue.

On June 29, 2026, Ingham County Circuit Court Judge Rosemarie Aquilina granted Michigan Attorney General Dana Nessel's request for a 14-day temporary restraining order barring Kalshi from offering or promoting sports contracts to people in the state. The platform must use third-party geolocation technology that complies with state rules to block users. Violations carry a fine of $120,000 per day, and the order was originally set to remain in effect through July 13.

Kalshi is a prediction-market platform regulated by the U.S. Commodity Futures Trading Commission (CFTC) that allows users to trade contracts based on sporting-event outcomes. Illinois has subjected such products to state sports-betting restrictions, sparking a dispute over whether federal derivatives oversight preempts state intervention. The outcome could also affect how prediction markets operate across states.

Kalshi recently sued Illinois officials to challenge a provision in the state's newly enacted budget bill that is scheduled to take effect on July 1. The company argues that restrictions on sporting-event contracts encroach on the CFTC's exclusive regulatory authority. It is seeking to block enforcement, saying the provision would immediately restrict its products and cause irreparable harm that monetary damages could not adequately remedy.

Kalshi is a Commodity Futures Trading Commission-regulated designated contract market where users trade on the outcomes of elections, entertainment events and other events. As the market expands rapidly, traders with nonpublic information could distort prices and undermine trust. The platform therefore established an independent surveillance and audit committee in February 2026 and publicly disclosed enforcement actions for the first time, setting an insider-trading enforcement precedent for prediction markets.

On February 25, 2026, Kalshi found that MrBeast editor Artem Kaptur had used nonpublic information to trade and earned more than $5,000. It fined him $20,397.58 and banned him for two years. On April 22, it also penalized Mark Moran and two other candidates who bet on their own election prospects, banning each for five years and imposing fines of up to about $6,200. Starting June 10, users trading in high-risk markets must disclose their employers.

Kalshi is a designated contract market regulated by the U.S. Commodity Futures Trading Commission (CFTC) that offers event contracts tied to outcomes including sports results. The Ohio Casino Control Commission considers such products to be sports betting that requires a license, prompting Kalshi to sue in October 2025. The dispute centers on whether federal derivatives regulation preempts state intervention, and its outcome could also affect platforms such as Polymarket.

On May 12, 2026, the CFTC filed an amicus brief with the U.S. Court of Appeals for the Sixth Circuit supporting Kalshi’s challenge to a federal district court’s March 2026 denial of an injunction. The CFTC called Ohio’s action a “jurisdictional overreach” and asked the court to affirm its exclusive authority over event contracts offered on designated contract markets. The filing marks the agency’s second intervention in a similar case, following its support for Crypto.com in the Ninth Circuit in February.

Kalshi is a designated contract market regulated by the US Commodity Futures Trading Commission, allowing users to trade event contracts tied to outcomes including sports results. Each contract settles at a maximum of $1. New Jersey's Division of Gaming Enforcement classified the activity as unlicensed sports betting, raising the question of whether federal derivatives regulation preempts state law.

On April 6, 2026, the US Court of Appeals for the Third Circuit voted 2–1 to uphold a preliminary injunction issued on April 28, 2025. The court found that sports event contracts are swaps under the Commodity Exchange Act and fall under the CFTC's exclusive jurisdiction. On June 26, the state separately requested an extension until September 4 to file a petition for a writ of certiorari with the Supreme Court.

Kalshi is a designated contract market approved by the U.S. Commodity Futures Trading Commission, or CFTC, and argues that its event contracts are federally regulated derivatives. Arizona maintains that the platform accepts wagers on sports and elections, amounting to unlicensed gambling. The case turns on whether federal commodities law preempts state enforcement and could reshape how prediction-market oversight is divided across the United States.

Arizona Attorney General Kris Mayes charged KalshiEx LLC and Kalshi Trading LLC on March 17, 2026, with 20 misdemeanor counts, including four related to election betting. The indictment did not specify the amount involved or damages sought. U.S. District Judge Michael Liburdi first paused the prosecution on April 10 and issued a preliminary injunction on May 5, finding that the CFTC may have exclusive jurisdiction over the contracts at issue.

Kalshi is a designated contract market regulated by the U.S. Commodity Futures Trading Commission, offering event contracts that include the outcomes of sporting events. The dispute centers on whether such products fall exclusively under federal commodities law or may be treated by states as unlicensed gambling. The ruling could affect the platform’s ability to operate across state lines and define the boundary between federal and state regulatory authority.

On March 11, 2026, Kalshi sued Iowa Attorney General Brenna Bird, the Iowa Racing and Gaming Commission and its commissioners in federal court in Iowa. The platform said it had asked the state on March 10 for assurances that it would not take enforcement action but received a written response stating that it would provide no assurances about future enforcement. Kalshi therefore argued that the risk of its contracts being blocked had become concrete. The lawsuit seeks no monetary damages and primarily asks the court to bar state intervention.