A judge in Washington state has issued a preliminary injunction against Kalshi, determining that state gambling laws are not overridden by federal commodities regulations. The ruling supports the state's claim that Kalshi operates unlicensed gambling activities.
King County Superior Court Judge John McHale ruled that the Commodity Exchange Act does not preempt Washington's gambling laws, allowing the state to enforce restrictions on Kalshi’s event contracts. The judge also instructed Kalshi to preserve all records related to its Washington customers immediately.
The court postponed finalizing the scope and implementation of the injunction until early August. By August 3, both parties must submit proposals outlining restrictions for the judge’s review, with a further order expected by August 5. Kalshi’s obligations regarding geofencing or handling existing positions remain undefined pending the final order.
Kalshi had argued that the Commodity Futures Trading Commission’s (CFTC) exclusive authority over designated contract markets shielded it from state gambling laws. The judge dismissed this, citing statutory language that preserves state regulatory power and affirms states' rights to define illegal gambling activities within their borders. on top of that, the court rejected Kalshi’s reliance on the CFTC's impartial-access rule, stating it does not require offering contracts in states where doing so violates local laws.
This decision advances a lawsuit initiated by Washington Attorney General Nick Brown in March, accusing Kalshi, a federally registered exchange, of running an unlicensed online gambling operation. The case was initially moved to federal court by Kalshi but was sent back to state court for further proceedings.
