Judge Rejects Kalshi’s Preemption Defense, Grants Injunction

King County Superior Court Judge John McHale granted a preliminary injunction against Kalshi on Monday, finding Washington is likely to prove some of the exchange’s event contracts violate state gambling and consumer-protection laws. The order requires Kalshi to preserve records related to Washington customers while the courts finalize broader restrictions.

The injunction does not yet specify how quickly Kalshi must block Washington users, which contract categories will be restricted, or how existing customer positions should be handled. McHale directed the parties to submit agreed or competing proposals for the injunction’s terms by noon on Aug. 3 and said he intends to issue a more detailed order by Aug. 5.

The case was filed by Washington Attorney General Nick Brown in March, accusing Kalshi of operating an unlicensed online gambling business despite its federal registration. Kalshi removed the case to federal court; U.S. District Judge John Coughenour returned it to state court in May, finding the complaint sought to enforce state gambling laws rather than create federal jurisdiction. The Ninth Circuit declined to pause that remand.

Kalshi argued the Commodity Exchange Act and CFTC rules preempt state law for contracts traded on a CFTC-registered exchange and that an impartial-access requirement prevents excluding users by location. McHale rejected those defenses, writing that the Commodity Exchange Act does not displace Washington’s gambling law and citing federal language that preserves state authority. He also said the CEA allows states to treat certain event contracts as unlawful gambling and found the impartial-access rule does not require offering contracts where state law forbids them.

Kalshi’s spokesperson Jacki McGavick maintained that states lack jurisdiction over prediction markets and referenced a recent appellate decision that found federal law likely preempted state limits on some sports contracts in another case. Washington’s order follows a separate judge’s ruling in New York that also declined to find federal preemption.

The state court has not resolved the underlying lawsuit and has not awarded restitution, penalties or disgorgement. The preliminary injunction gives Washington temporary relief and preserves evidence while the parties submit proposed injunction language and the court issues a final set of restrictions in early August.