Washington State Becomes the 11th: Judge Rules Kalshi Likely Ran an Illegal Gambling Operation
King County Superior Court Judge John McHale granted Washington state a preliminary injunction against Kalshi on July 21, ruling the prediction market platform likely operated an illegal gambling operation under state law. McHale rejected Kalshi's CFTC-preemption defense. He asked both sides to present a compliance plan by the first week of August. Washington is the 11th state to take legal action — and the fourth where a court has ruled against Kalshi, after Michigan, Nevada, and New York.
King County Superior Court Judge John McHale granted Washington state a preliminary injunction against Kalshi on July 21, 2026, ruling that the prediction market platform likely ran an illegal gambling operation under Washington state law. McHale rejected Kalshi's argument that its status as a CFTC-designated contract market preempts state gambling enforcement — the same federal-preemption theory that succeeded in Arizona in May but has now failed in Michigan, Nevada, New York, and Washington. The ruling was requested by Washington's Attorney General after the Washington State Gambling Commission sent Kalshi a notice stating that offering event-based contracts was not authorized in the state — a notice Kalshi had, per court filings, ignored. McHale asked both sides to confer and present a compliance plan by the first week of August.
Washington is the 11th state to take active legal action against prediction market platforms and the fourth where a court ruling has gone against Kalshi. The pattern is now impossible to miss: every state-level court that has directly ruled on the CFTC-preemption question — Michigan's Judge Maloney in June, Nevada's First Judicial District in May, New York's Judge Torres in July, and now Washington's Judge McHale — has rejected the preemption argument and allowed state gambling enforcement to proceed. The lone exception remains Arizona, where a federal court granted the CFTC a preliminary injunction in May. The split between state and federal court outcomes reflects the underlying jurisdictional uncertainty: state courts applying state gambling law have consistently concluded that a CFTC license does not operate as a general exemption from state gambling rules, while the CFTC's own federal preemption theory prevailed only where the agency was the direct plaintiff.
McHale's specific framing — that Kalshi 'likely ran an illegal gambling operation' — is notable. Unlike the Michigan ruling, which turned primarily on whether event contracts are swaps under the Commodity Exchange Act, McHale appears to have reached the state-gambling-law conclusion directly, without extensive engagement with the swap definition question. That is a simpler analytical path that other state courts could follow: rather than engaging with federal derivatives law, a judge can hold that the activity is gambling under state definitions and that no federal license automatically exempts it. If that reasoning becomes the template, the litigation burden shifts significantly toward platforms, which would need to defeat a state-law gambling characterization in each of the states where cases are pending.
Washington joins a litigation map that now spans four time zones and four federal circuits. The practical effect for Kalshi users in Washington State remains unclear: McHale asked the parties to negotiate the specific terms of the injunction rather than imposing immediate access restrictions, meaning the enforcement mechanism is still being worked out. But the ruling adds legal pressure ahead of two hard deadlines: the Michigan geofencing deadline of August 12 (with a $500,000-per-day fine for non-compliance) and the Minnesota felony ban's August 1 effective date — unless Judge Menendez in Minnesota issues the platforms a preliminary injunction before then.
Operators mentioned in this article
Recent updates
An Independent Integrity Body Found 7 Betting Irregularities at the World Cup. FIFA Said There Were None. The Clash Centers on Polymarket.
The Group of Copenhagen — the Council of Europe's independent match manipulation watchdog — raised seven yellow notices for potential betting irregularities during the 2026 World Cup, in direct contradiction to FIFA's own Integrity Task Force, which published an all-clear on Tuesday. The most troubling finding involves Polymarket: the platform opened a market on July 2 asking whether Folarin Balogun would play against Belgium — the same day Balogun received a red card and three days before FIFA publicly confirmed his ban was suspended. No equivalent markets were opened for any of the other 14 red cards shown at the tournament.
After Yesterday's Hearing, Congress Looks Ready to Legislate on Prediction Markets — Not Just Watch
The House Agriculture Subcommittee held a two-hour hearing on July 22 examining sports event contracts, with witnesses from the American Gaming Association, tribal gaming, and both sides of the CFTC authority debate. Subcommittee Chair Dusty Johnson said Congress 'cannot afford to be silent' and signaled there is 'work for them to do.' Witnesses urged members to advance H.R. 7840, the Event Contract Enforcement Act, which would ban sports event contracts outright. The hearing adds a third front to a fight that is already being waged simultaneously in ten state courts and at the CFTC.
Bloomberg Found $200 Million in Suspicious Wagers on Kalshi and Polymarket. An Army Sergeant Has Already Been Indicted.
A Bloomberg investigation identified approximately $200 million in wagers on Kalshi and Polymarket between January and June 2026 displaying characteristics associated with potential insider trading — concentrated in geopolitical event markets. A federal indictment unsealed in April charged US Army Master Sergeant Gannon Ken Van Dyke with using classified information about Operation Absolute Resolve, the operation that captured Venezuelan President Nicolás Maduro, to generate $409,000 in profit. 57% of wallets with unusually successful returns were created within 24 hours of placing bets. The House Oversight Committee has launched a formal investigation.