Washington Files Lawsuit Against Kalshi, Joining War Against Prediction Markets
Key Facts
- Washington’s lawsuit claims Kalshi’s contracts on sports, elections, and other events are illegal gambling under state law - regardless of the “prediction market” label.
- The state seeks an injunction, restitution, disgorgement, civil penalties, and recovery of user losses.
- Washington has prohibited internet gambling since 2006, with a narrow exception for sports wagers placed and accepted on tribal lands.
- The case joins actions against Kalshi in Massachusetts and Michigan, a Nevada TRO, and Arizona criminal charges.
Washington’s complaint goes well beyond a warning letter
Washington Attorney General Nick Brown sued Kalshi on March 27, alleging the platform is violating the state Gambling Act, Consumer Protection Act, and Recovery of Money Lost at Gambling Act.
According to the complaint, Kalshi allows Washington users to stake money on sports, elections, entertainment, and other real-world outcomes in exchange for payouts if those outcomes occur. The state argues that makes the product gambling under Washington law, regardless of how Kalshi describes it.
Brown made that position explicit in the state’s announcement of the case, saying: “Kalshi wants people betting on almost everything possible in life.” He added that calling the product a prediction market does not change the legal analysis because, in Washington’s view, “Kalshi’s operations clearly fall under the definition of illegal gambling in Washington.”
The state says branding does not change the product
Washington’s complaint argues that Kalshi’s exchange structure and federal regulatory status do not override state gambling law when the product is offered to Washington residents.
The filing says Kalshi has “restructured and rebranded traditional gambling models as ‘predictive markets,’” but that users are still risking money on future outcomes for the chance to win a payout. In the state’s view, that is the substance of gambling.
The complaint also stresses that Washington is not a permissive online gambling state. Internet gambling has been broadly banned there since 2006, with a narrow exception for sports wagers placed and accepted on tribal lands.
Washington wants more than a cease-and-desist
The lawsuit seeks a permanent injunction, restitution for Washington users, disgorgement of profits, civil penalties, and other monetary relief tied to the alleged conduct.
An injunction would block Kalshi from operating in the state, while restitution and disgorgement aim to unwind past activity by forcing the company to return user losses and surrender revenue generated from Washington residents. Civil penalties add an additional layer of financial exposure under the state’s consumer protection framework.
That raises the stakes considerably. A warning letter can signal disapproval, but a lawsuit seeking injunctive relief, restitution, and penalties is an attempt to force a business-model reckoning inside the state.
The filing adds to a growing multi-state pressure campaign
Washington is the latest state to take formal action against Kalshi, as pressure builds across multiple jurisdictions over how prediction markets should be treated under existing law.
The filing follows civil action in Massachusetts and Michigan, a temporary restraining order issued in Nevada, and criminal charges filed in Arizona. Those cases are being brought under different legal theories - ranging from consumer protection claims to direct gambling enforcement - but they converge on the same core question: whether event-contract markets can be offered to state residents without violating local gambling statutes.
Taken together, the pattern suggests a coordinated shift at the state level. Rather than waiting for a definitive federal resolution, multiple jurisdictions are now testing the boundaries of prediction markets in court, increasing the likelihood of conflicting rulings and a more consequential legal fight over the category.
Why This Matters For Bettors
This lawsuit is another clear signal that states are no longer treating prediction markets as a niche product. Washington is treating Kalshi as an unlicensed gambling operator - not as a novel financial exchange that happens to involve sports and elections- and that distinction has immediate consequences for users.
In practical terms, that increases the risk of geofencing changes, market removals, account disruption, and a more fragmented experience for users depending on where they live.
Washington is also a particularly difficult state for Kalshi to fight. Its ban on internet gambling is long-standing and explicit, with only narrow exceptions for tribal sportsbooks. That gives regulators a cleaner legal argument than states with broader online gaming frameworks. If Kalshi loses ground here, it strengthens the playbook for other states to follow.
At this point, it’s no longer a question of isolated disputes. Multiple states are now moving against the same product from different angles, and that pattern matters more than any single case. It suggests a coordinated shift: states are testing whether prediction markets can operate within their borders under existing gambling laws, rather than waiting for a definitive federal answer.
Underneath all of this is a fundamental conflict. Traditional sportsbooks operate under state licenses, pay state taxes, and follow state rules. Kalshi’s position has been that its event contracts sit inside a federal commodities framework. States are increasingly responding that, whatever the federal theory may be, these products look and function like gambling when sold to their residents. That conflict now sits at the center of the market.
And until it is resolved, bettors should expect continued uncertainty around where these markets are available and how stable that access will be.
What Happens Next
The immediate next step is Kalshi’s response to the complaint. The company can answer the allegations, move to dismiss, or try to shift the fight into federal court if it argues the case turns on federal regulation and preemption. That would not resolve the dispute, but it would determine where the main legal battle is fought and how quickly the case moves.
Washington could also seek early court intervention if it wants to stop Kalshi from continuing to offer the disputed markets to residents while the case is pending. If that happens, the first meaningful milestone would be a hearing on temporary or preliminary relief rather than a final ruling on the merits. That is often where a court gives its first real signal about how seriously it views the state’s legal theory.
For users in Washington, the practical issue is whether Kalshi keeps operating in the state during that process. Unless a court orders otherwise, the lawsuit itself does not automatically shut the platform down.
But if Washington pushes for emergency relief, or if Kalshi decides the risk is too high, access for Washington residents could change well before the case reaches a final outcome.
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Marcus has spent over 20 years navigating the legal side of online betting - from his early days consulting for offshore operators to helping licensed U.S. sportsbooks launch in regulated markets. He’s worked with compliance teams, reviewed licensing frameworks in 15+ states, and advised on some of the biggest regulatory shifts since PASPA was repealed.
At BettingScanner, Marcus serves as the voice of reason - translating legalese into plain English and helping bettors understand what’s legal, what’s risky, and where the gray areas live. If you’re ever unsure about the rules, Marcus is your man - as he probably helped write them.
