Summary
- A judge in Washington has mandated Kalshi to cease offering bets on various topics including sports and politics.
- Kalshi is required to implement an IP and residency geofence by August 19, and a comprehensive multi-source solution by September 2.
- This directive comes just two days after the CFTC ordered the exchange to continue its operations using emergency powers.
A judge from the King County Superior Court has issued a ruling that compels Kalshi to suspend most of its operations in Washington, concluding that the exchange likely violated the state's Gambling Act and Consumer Protection Act by conducting an unauthorized gambling business, as reported by the state attorney general's office on Thursday.
The court order prohibits Kalshi from offering, accepting, or facilitating bets on sports, elections, politics, entertainment, culture, technology, science, and "mentions"—a feature allowing users to wager on whether a public figure will use specific words. The exchange must establish an IP address and residency-based geofence by August 19 and a more robust multi-source geofencing system by September 2. The attorney general's office indicated that these categories encompass a significant portion of Kalshi's business, which is heavily influenced by sports betting.
Washington Attorney General Nick Brown remarked that Kalshi has profited significantly from betting on sports, elections, natural disasters, and events related to the Iran war, asserting that his office will continue to hold the exchange accountable.
Additionally, the ruling prohibits Kalshi from advertising the affected contracts in Washington, with the court determining that its promotion of illegal gambling constituted "unfair and/or deceptive acts or practices." The state's complaint references a tweet from Kalshi in which an individual informs a friend about finding a way to bet on the NFL while residing in Washington, suggesting that the company was aware it was circumventing state regulations.
Conflict Between States and the CFTC
This ruling follows a recent action by the Commodity Futures Trading Commission (CFTC), which invoked emergency powers to allow Kalshi to continue trading under the Commodity Exchange Act's established principles, responding to the exchange's alert of a market emergency after being sued by New York. The federal agency maintains that event contracts are interstate derivatives that fall outside the jurisdiction of state gambling laws, while Washington asserts that each bet placed on Kalshi involves money wagered on a contingent event, thus qualifying as gambling under state law.
The CFTC has initiated legal action against nine states on this matter, starting with Illinois, Arizona, and Connecticut and continuing with Wisconsin and Minnesota, which was sued shortly after implementing its ban. Former President Donald Trump has supported the CFTC, referring to state officials opposing prediction markets as "SCUM."
Kalshi has not fared well in legal battles compared to its federal counterpart. This latest ruling builds on a preliminary injunction issued in July, where the judge determined that "substantial injury to Washington consumers" would likely occur without it, and the Washington Court of Appeals denied Kalshi's request to suspend that injunction.