Prediction Market Kalshi Faces Washington State Lawsuit Alleging Illegal Gambling

Washington state sued Kalshi Friday (March 27), alleging that the company’s prediction market is, under the state’s definition, a betting platform that enables illegal gambling.

The complaint argues that Kalshi violates the state’s Gambling Act and Consumer Protection Act, the Washington State Office of the Attorney General said in a Friday press release.

It seeks to halt the alleged unlawful activities, recover money lost by the state’s residents, and assess civil penalties, according to the release.

Washington State Attorney General Nick Brown said in the release that Kalshi allows people to bet on elections, Supreme Court cases, wars and “almost everything possible in life.”

“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,” Brown said. “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.”

Reached by PYMNTS, Kalshi Head of Communications Elisabeth Diana said in an emailed statement: “If AG Brown hadn’t sued us ahead of our scheduled meeting with him, he would have known better than to say we offer war markets. We don’t.”

“As other courts have recognized, Kalshi is a regulated, nationwide exchange for real-world events, and it is subject to exclusive federal jurisdiction,” Diana added. “It’s very different from what state-regulated sportsbooks and casinos offer their customers. We are confident in our legal markets.”

In another, separate case, the company is facing criminal charges in Arizona.

Arizona Attorney General Kris Mayes announced March 17 that she filed criminal charges alleging that the companies behind Kalshi violated Arizona laws that prohibit operating an unlicensed wagering business and that ban betting on elections.

Reached by PYMNTS at the time, Kalshi said in an emailed statement that Arizona’s charges are meritless and that the company will fight them in court.

“These state-court charges are seriously flawed. It’s gamesmanship,” the company said. “Four days after Kalshi filed suit in federal court, these charges were filed to circumvent federal court and short-circuit the normal judicial process. They attempt to prevent federal courts from evaluating the case based on the merits — whether Kalshi is subject to exclusive federal jurisdiction.”

It was reported in February that the U.S. Commodity Futures Trading Commission (CFTC) is making the case that the authority to oversee prediction markets lies with it. The regulator filed an amicus brief in federal court defending its right to enforce prediction markets rather than individual states.

In a third case, it was reported March 20 that a Nevada judge temporarily barred Kalshi from offering event contracts for sports, election and entertainment in Nevada. In that state, the company is fighting a case in which the Nevada Gaming Control Board contends that prediction markets that facilitate unlicensed gambling are illegal in the state.