A Washington state judge has granted a preliminary injunction against Kalshi after rejecting its argument that federal commodities law overrides state gambling rules. The court found Washington is likely to prove its claims, but will not finalize the restrictions imposed on the prediction market until August.
Key Takeaways
Washington judge finds state gambling laws are not federally preempted.Kalshi must preserve records while broader injunction terms are finalized.Parties must propose restrictions by Aug. 3 ahead of an Aug. 5 order.Court Says Federal Registration Does Not Displace State Law
McHale immediately ordered Kalshi to preserve records connected to Washington consumers. The wider operating terms have not yet been settled: the parties must submit agreed or competing proposals by noon on Aug. 3, and the judge said he intends to issue a further order specifying the injunction’s requirements by Aug. 5.
The ruling therefore does not yet establish how quickly Kalshi must geofence Washington, which categories of event contracts will be restricted or how existing customer positions must be handled. It grants preliminary relief to the state while leaving the precise implementation language for the August order.
Kalshi argued that the Commodity Futures Trading Commission’s exclusive jurisdiction over designated contract markets prevents Washington from applying gambling laws to contracts offered on its exchange. McHale rejected that position, writing that the Commodity Exchange Act does not preempt Washington gambling law and that Kalshi can comply with both state and federal requirements.
The judge pointed to federal statutory language preserving authority held by state regulators and courts. He also cited the CEA provision governing event contracts involving gaming or activity unlawful under state law, reasoning that states retain the power to determine what constitutes illegal gambling within their borders.
McHale separately rejected Kalshi’s reliance on the CFTC’s impartial-access rule. Kalshi has argued that federally regulated exchanges cannot discriminate among users based on their location, but the judge found the rule does not require a platform to make contracts available where they violate state law.
The Washington court has not resolved the state’s lawsuit or awarded restitution, penalties or disgorgement. Its preliminary finding nevertheless gives the attorney general immediate leverage and adds another state-court rejection of Kalshi’s central defense that federal exchange status leaves no room for local gambling enforcement.
