Kalshi is facing a new legal challenge after Washington state sued the prediction market operator over its event-based contracts.
Summary
- Washington sued Kalshi, alleging its contracts broke gambling and consumer protection laws in the state.
- Kalshi moved the Washington case to federal court and said the state gave no warning.
- Nevada and Arizona also challenged Kalshi as pressure on prediction markets grew across several states.
The case adds to a growing list of state actions against the company as regulators question whether its products amount to unlicensed gambling.
Washington Attorney General Nick Brown filed the complaint on Friday, alleging that Kalshi violated state gambling rules through its website and app. The state said the platform offered consumers a way to place money on future events and receive payouts based on outcomes.
The complaint said Kalshi breached the Washington Consumer Protection Act, the Gambling Act, and the Recovery of Money Lost at Gambling Act. State officials pointed to Washington’s ban on online gambling and its tight control of the gaming market as the basis for the lawsuit.
Brown’s office said Kalshi’s platform worked like a sportsbook. In its statement, the office said,
”Kalshi’s website and app show consumers a range of events that they can bet on and the odds for those various events, which dictate how much the bettor will be paid out if the event occurs.”
Washington said the company’s products fall under the state’s definition of gambling. Under state law, gambling includes risking something of value on the outcome of a contest of chance or a future contingent event.
The attorney general’s office said each Kalshi contract involved money, chance, and a payout to winners. It also argued that calling the service a prediction market did not change how the products function under state law. The complaint said Kalshi let users ”bet on anything” while avoiding the gambling label.
Kalshi moved quickly to shift the case to federal court. In its filing, the company said the issues raised in Washington were already being fought in other federal courts and that there had been ”no warning or dialogue” from the state before the lawsuit.
Legal pressure grows across several US states
The Washington case follows other recent legal setbacks for Kalshi. Earlier this month, a Nevada judge temporarily blocked the company from operating in the state after finding that regulators were likely to succeed in their case.
Arizona also moved against the company days earlier. Attorney General Kris Mayes announced charges, alleging that Kalshi ran an illegal gambling business in the state without a license and offered illegal election wagering.
Kalshi has argued that the US Commodity Futures Trading Commission has exclusive authority over its event contracts. Even so, state regulators and lawmakers continue to challenge the platform as scrutiny around prediction markets grows across the United States.
