Gambling site—sorry, we mean “prediction market”—Kalshi is pretty obviously running an illegal gambling site prohibited by Washington state law, a state judge ruled this week.
In an Aug. 13 press release, the state attorney general’s office touted that King County Superior Court Judge John McHale sided with prosecutors and issued a “final order” that Kalshi shut down most types of betting in the state. Kalshi has fought the preliminary injunction in court since mid-July.
McHale’s order applies to all bets “related to sports, elections, politics, entertainment, culture, tech and science, or mentions,” requires Kalshi implement a geofence by Sept. 2, 2026, and threatens penalties of $120,000 for every day Kalshi continues to operate without a geofence past that date. Bets on commodities, climate, economics, and finance aren’t subject to the order.
The judge couldn’t be clearer about his thoughts on Kalshi: it offers “online gambling activities” that “Kalshi refers to as a ‘prediction market’” instead.
“Kalshi earns a transaction fee on each bet placed,” McHale wrote, noting Kalshi never obtained a license with the state’s Gambling Commission. “Each bet risks money, relies in part on chance, and promises a payout to winners.”
In addition to finding it likely that Kalshi’s operations are illegal, McHale found that its ads were likely to trick a “reasonable consumer” into believing Washington state allows gambling. In reality, virtually all betting is illegal except on tribal land.
To be fair, Kalshi barely puts up the pretense of its legality under state law—the New York Times noted prosecutors cited Kalshi ads containing text like, “I found a way to bet on the NFL even though we live in Washington.” Instead, the company just insists that it does not have to comply with said state laws.
Federal law hands “exclusive jurisdiction over our exchange” to the U.S. Commodity Futures Trading Commission (CFTC), Kalshi spokesperson Jacki McGavi told Gizmodo via email. “We respectfully disagree with the court’s decision and are considering all legal options.”
For some weird reason, the statement also contained unprompted denials that the company offers markets on wildfires, “war, death, or terrorism.” The next line in the statement linked to a tweet from Kalshi co-founder and CEO Tarek Mansour on the “death carveout” it invoked to rule that the death of former Iranian Supreme Leader Ali Khamenei was not a form of “leaving office” by a particular date, so clearly there is some way of profiting off death on the site.
Kalshi is facing similar pushback from state authorities across the country, yet Trump and his cronies have latched onto prediction markets like a not-particularly-choosy sea lamprey onto a diseased shark. Trump-appointed CFTC chair Mike Selig has embraced this interpretation of the Commodity Exchange Act, and the agency has sued multiple states (including Connecticut, Arizona, and Illinois) for attempting to regulate sites like Kalshi and its competitor Polymarket.
Earlier this week, the CFTC announced it had “ordered [Kalshi] to continue to operate” in the state of New York despite a state lawsuit similarly alleging Kalshi is illegal. It previously issued a similar order in Michigan. (If you’re confused how the CFTC can “order” a company to operate, it more or less argues Kalshi is legally obligated to process customer bets in the same manner that stock exchanges do trades.)
CFTC chair Mike Selig, whose main priorities have included legalizing ultra-risky cryptocurrency derivatives, argued in a press release in August that Congress “did not intend for derivatives exchanges to be regulated under a patchwork of state gaming laws.”
This industry-friendly legal argument has provided crucial cover for “prediction markets” to claim they are operating as mostly unregulated businesses rather than illegal ones. It certainly doesn’t help that this gigantic, multi-state legal brawl takes place in a state of genuine uncertainty as to whether, say, the Supreme Court will agree with the companies that the CFTC has sole jurisdiction.
Meanwhile, the New York Times reported this week that the number of reports from Kalshi and Polymarket raising red flags to the CFTC this year (over 50 and 90, respectively) suggests both sites are rife with insider traders. Many will likely never face charges courtesy of both staffing shortages at the CFTC and the agency’s “own deference” to the companies, the Times wrote.
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