Washington State Sues Kalshi Over Alleged Gambling Violations

Washington Attorney General Nicholas Brown sued prediction market operator Kalshi on Friday, March 28, 2026, alleging the company violated state gambling laws by offering products that meet definitions of gambling, professional gambling, and bookmaking. The lawsuit came without prior warning and ahead of a scheduled meeting with the company, prompting Kalshi to file for removal to federal court. The action follows Nevada's appeals court victory one week earlier allowing a temporary restraining order that forced Kalshi to remove sports, entertainment, and election contracts for at least two weeks. The legal battles center on a fundamental jurisdictional dispute: Kalshi and CFTC Chair Mike Selig argue prediction markets are federally regulated derivatives, while states contend they are gambling products disguised to evade state laws. Legal experts predict the conflict will reach the U.S. Supreme Court for resolution.

Washington State's Lawsuit Against Kalshi

• ▪Washington state Attorney General Nicholas Brown sued Kalshi ahead of a scheduled meeting with the company
• ▪Washington state sued prediction market provider Kalshi on Friday, March 28, 2026, alleging the company violated state gambling laws
• ▪Washington state alleged that Kalshi's products promoted gambling addiction and targeted college students
• ▪Washington state alleged that Kalshi's activities met state definitions of gambling, professional gambling, and bookmaking
• ▪Kalshi filed to move the Washington state case to federal court

Nevada's Legal Actions Against Prediction Market Providers

• ▪Nevada District Judge Kristin Luis wrote that Coinbase did not dispute it offered event-based contracts that meet the definition of sports pools under Nevada law
• ▪Nevada issued an initial temporary restraining order against Coinbase in early February 2026
• ▪Kalshi's Nevada users were still able to use the platform after the temporary restraining order went into effect, according to Gambling Insider
• ▪Nevada's preliminary injunction gave Coinbase 60 days to make technological enhancements to comply with the order
• ▪Nevada won an appeals court victory allowing it to file for a temporary restraining order against Kalshi one week before March 28, 2026
• ▪Nevada secured a preliminary injunction against Coinbase on Thursday, March 26, 2026, requiring it to continue a pause in its prediction market offerings in the state
• ▪Nevada's temporary restraining order forced Kalshi to remove its sports, entertainment and election contracts from the state for at least two weeks
• ▪A Nevada state judge will hold a hearing on Friday, April 3, 2026, to decide whether to extend the restriction on Kalshi

Federal vs. State Jurisdiction Debate Over Prediction Markets

• ▪Prediction market providers argue that these companies offer derivatives contracts that are appropriately regulated at the federal level
• ▪Commodity Futures Trading Commission Chair Mike Selig argues that prediction market companies offer derivatives contracts appropriately regulated at the federal level
• ▪Nevada and Washington's federal district courts are both part of the Ninth Circuit Court of Appeals
• ▪Legal experts told CoinDesk that the prediction market jurisdiction argument is likely to wind up before the U.S. Supreme Court
• ▪States have argued that prediction market companies are offering gambling products dressed up as something else and should be subject to state gambling laws

Perspective of Kalshi

• ▪Kalshi contends it received no warning or dialogue from Washington state prior to the lawsuit being filed
• ▪Kalshi argues it is a regulated, nationwide exchange for real-world events subject to exclusive federal jurisdiction

Perspective of Washington and Nevada state regulators

• ▪Washington state alleged that Kalshi's products promoted gambling addiction and targeted college students
• ▪States have argued that prediction market companies are offering gambling products dressed up as something else and should be subject to state gambling laws
• ▪Washington state alleged that Kalshi's activities met state definitions of gambling, professional gambling, and bookmaking

Perspective of Commodity Futures Trading Commission

• ▪Commodity Futures Trading Commission Chair Mike Selig argues that prediction market companies offer derivatives contracts appropriately regulated at the federal level

Perspective of Legal experts

• ▪Legal experts told CoinDesk that the prediction market jurisdiction argument is likely to wind up before the U.S. Supreme Court