Tired: Kalshi suing states.
Wired: States suing Kalshi.
Washington Attorney General Nick Brown sued Kalshi in state court on Friday, the latest example of a state being more aggressive in trying to get prediction markets to stop offering sports event contracts in its jurisdiction.
The lawsuit filed in King County Superior Court asks the court to stop Kalshi from operating in the state and “provide for restitution to consumers of money or property unlawfully acquired by Defendant.”
From a press release:
…Brown filed a lawsuit today against Kalshi, a company that violates state law by operating and advertising an online platform where users can bet on sports, elections, and other events. Kalshi even allows consumers to bet on the total number of “measles cases this year,” “what will witnesses say” during a child trafficking hearing, or potential outcomes in the Iran war.
Kalshi attempts to skirt state law by branding its betting platform as a “prediction market,” but whatever Kalshi chooses to call it, Kalshi’s operations clearly fall under the definition of illegal gambling in Washington. The lawsuit argues Kalshi violates the Washington state Gambling Act and Consumer Protection Act, and seeks to halt these unlawful activities, recover money lost by Washingtonians, and assess civil penalties.
“Kalshi wants people betting on almost everything possible in life—the outcome of elections, Supreme Court cases, even wars. For Kalshi, every event, every tragedy is nothing more than a potential way for Americans to risk their fortunes and for Kalshi to get rich,” said Brown. “As they advance this bleak vision of the future, they line their pockets and pat themselves on the back for sneaking around Washington’s gambling laws. No more.”
The definition of gambling under Washington law is “staking or risking something of value upon the outcome of a contest of chance or a future contingent event,” and Kalshi’s activities fall squarely within that definition. Each Kalshi bet risks money, relies in part on chance, and promises a payout to winners.
From the AG on Twitter:
Generally, prediction market court cases have surfaced from a state sending a cease-and-desist letter, and then operators like Kalshi suing the state to stop enforcement. Kalshi argues that it is federally regulated, and that federal law preempts state gambling laws.
Nevada, Massachusetts, and Arizona have all tried to stop prediction markets by going to state court, with the latter bringing criminal charges against Kalshi.
The strategic shift from defense to offense is the real story. When states were sending cease-and-desists and Kalshi was suing first, Kalshi got to choose the forum and frame the preemption argument on its terms. States filing first in their own courts flips the procedural leverage — now Kalshi has to argue federal preemption as a defense rather than as a sword. Worth noting that Washington's statutory definition of gambling ("staking something of value upon a future contingent event") would technically cover half of what happens on the CME. The distinction between a "prediction market" and a "futures exchange" has always been more about who your regulator is than what you're actually doing.