Kalshi Limits Washington Users’ Access Due to Mounting Legal Dispute
Kalshi has restricted access for customers in Washington as it petitions a King County judge to review an injunction that limits its prediction markets.
Summary
- Washington mandates Kalshi to prevent residents from engaging in seven event-contract categories per an amended preliminary injunction.
- Kalshi is seeking reconsideration after Washington temporarily postponed enforcement against its federally regulated competitor, OG.
- A decision regarding Kalshi’s reconsideration request is set for September 2, absent oral arguments at this time.
- Access to Kalshi is also restricted in Michigan and Nevada as litigation surrounding federal preemption progresses across the nation.
- CFTC Chairman Michael Selig anticipates new event-contract proposals that will encompass consumer protection and market governance requirements.
The motion filed on August 21 contends that Washington has given the competing exchange North American Derivatives Exchange, or OG, preferential treatment. Both Kalshi and OG are designated contract markets under the regulation of the Commodity Futures Trading Commission.
Judge John McHale is expected to review Kalshi’s request on September 2 without oral arguments. The existing restrictions will stay in place while the request is under consideration.
Kalshi has enacted geofencing in Washington
The amended preliminary injunction necessitated that Kalshi implement IP address and residency-based restrictions by August 19. A comprehensive GeoComply system, utilizing various location resources, is required to be operational by September 2.
If Kalshi fails to meet the second deadline, it could incur a penalty of $120,000 per day unless it provides a sworn explanation for the delay. The company has informed the court that it has already restricted access for Washington customers.
The order encompasses contracts related to sports, elections, politics, entertainment, culture, technology, and science, as well as certain “mentions” markets. Moreover, record-preservation requirements remain intact.
Attorney General Nick Brown asserts that these products constitute unlicensed gambling. As previously reported by crypto.news, the Washington court dismissed Kalshi’s initial jurisdiction claim and found that the state was likely to prevail at the preliminary phase.
This ruling does not constitute a final decision on all claims. Kalshi continues to maintain that the federal Commodity Exchange Act grants the CFTC exclusive authority over contracts listed by registered exchanges.
Kalshi highlights differential treatment for OG
Kalshi’s request for reconsideration hinges on an agreement dated August 18 between Washington officials and OG. This agreement stipulates that the state will refrain from pursuing civil or criminal enforcement action regarding OG’s federally traded event contracts until related appeals are settled.
Kalshi contends that the event contracts deemed unacceptable by the state are now available through a competitor. However, the court has not accepted this characterization.
Kalshi argues that the agreement undermines Washington’s prior assertion that ongoing trading results in immediate consumer harm. The company requests that Judge McHale vacate portions of the injunction or provide a stay equivalent to OG’s arrangement.
Kalshi positions OG as “identically situated,” but this remains a legal stance rather than an established court finding. Washington may contend that procedural history or negotiated terms create distinctions between the two cases.
Restrictions in Michigan and Nevada remain in effect
Washington now joins Michigan and Nevada in enforcing restrictions against Kalshi. Courts in these states have mandated location controls while state authorities pursue claims of unlicensed sports wagering.
Kalshi has appealed or contested these orders, maintaining its primary argument that federally regulated event contracts are derivatives, which means state gambling laws cannot dictate their listing or trading.
Courts have yet to establish a unified national ruling. Conversely, a federal judge has overturned Minnesota’s prediction-market prohibition, determining that registered exchanges are likely to prevail on part of their preemption argument.
Pending disputes regarding prediction-market authority also involve New York, Connecticut, Massachusetts, Ohio, Maryland, Utah, and Arizona. The resolution may hinge on contract types, statutory language, and the procedural status of each case.
CFTC is preparing prediction-market safeguards
On August 20, CFTC Chairman Michael Selig affirmed that the agency would persist in defending its claimed exclusive jurisdiction over federally regulated event contracts.
He acknowledged concerns regarding retail protections and indicated that the commission would soon suggest amendments to Parts 38 and 40 of its regulations.
These proposals are anticipated to tackle issues of consumer protection, product governance, market design, listing standards, and incentive programs. The CFTC has already put forward changes elucidating how it could evaluate contracts involving gaming, war, terrorism, assassination, or illegal activities.
Selig noted that the amendments would be forthcoming, although the CFTC has yet to disclose their complete text or an official release date.
Proposed regulations must still navigate the federal rulemaking process and will not automatically override state court orders or determine whether federal law supersedes state gambling restrictions.
The immediate upcoming events include Kalshi’s reconsideration decision on September 2 and the geofencing deadline. Until a court provides relief, Washington customers will continue to be unable to access the restricted markets.