The Washington state attorney general alleged Kalshi offers "gambling products" products dressed up as prediction markets in a lawsuit Friday.
What to know:
- Washington state has become the latest to sue prediction market provider Kalshi, alleging the company violated state regulations.
- The filing came a week after Nevada won a temporary restraining order ordering Kalshi to stop offering sports, election and entertainment products in that state.
- Nevada also secured a preliminary injunction against Coinbase's prediction markets, which offered sports, election and entertainment bets.
The state of Washington has become the latest to sue a prediction markets provider, after alleging Friday that Kalshi had violated state gambling laws through its products.
According to the complaint, Washington has a tightly-regulated gambling market, including a ban on online gambling, but Kalshi's products bypass these regulations.
"Kalshi’s website and app show consumers a range of events that they can bet on and the odds for those various events, which dictate how much the bettor will be paid out if the event occurs," a press release from the state said. "This is exactly how sportsbooks and other gambling operations function. Kalshi advertises that they allow consumers to 'bet on anything' by simply calling their service a 'prediction market' rather than 'gambling.'"
The lawsuit said Kalshi's advertisements referred to "legal betting," and alleged the company's activities met state definitions of "gambling," "professional gambling," "bookmaking" and other key state provisions. It also included a provision alleging that Kalshi's products promoted gambling addiction and targeted college students in particular.
Kalshi filed to move the case to federal court, saying it was already litigating these issues in other federal courts and that it received "no warning or dialogue" from Washington prior to the lawsuit.
"If AG [Nicholas] 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," Kalshi's head of communication, Elisabeth Diana, told CoinDesk in a statement. While the Attorney General's press release referenced contracts on the Iran War, the suit itself only named a contract about when Iran's former Supreme Leader would be out of office.
"As other courts have recognized, Kalshi is a regulated, nationwide exchange for real-world events, and it is subject to exclusive federal jurisdiction. It's very different from what state-regulated sportsbooks and casinos offer their customers. We are confident in our legal arguments," she added.
Washington's filing continues a growing state backlash against prediction market providers. Prediction market providers and their proponents, including Commodity Futures Trading Commission Chair Mike Selig, argue that these companies offer derivatives contracts that are appropriately regulated at the federal level. States have argued that these companies are offering gambling products dressed up as something else and should be subject to state gambling laws as a result.
While both prediction market providers and states have had some initial legal victories, this argument is likely to wind up before the U.S. Supreme Court, legal experts have told CoinDesk.
Nevada actions
The suit came a week after Nevada won an appeals court victory allowing it to file for a temporary restraining order against Kalshi, forcing the company to remove its sports, entertainment and election contracts from the state for at least two weeks. A hearing will be held at the end of those two weeks on Friday, April 3, at which a state judge will decide whether to extend the restriction.
Trade publication Gambling Insider reported on Friday that Kalshi's Nevada users were still able to use the platform after the temporary restraining order went into effect.
Nevada also secured a preliminary injunction against Coinbase, requiring it to continue a pause in its prediction market offerings in the state in an order dated Thursday, March 26, following an initial temporary restraining order issued in early February.
Under Thursday's order, Nevada District Judge for the First Judicial District Court Kristin Luis wrote that Coinbase did not dispute it offered "'event-based contracts' that relate to sporting and other events, including college basketball games, college and professional football games and elections," which meet the definition of "sports pools" defined under Nevada law.
Coinbase is partnered with Kalshi, the judge noted. Like the Kalshi order, this one is ordering Coinbase not to offer sports, election or entertainment contracts in Nevada, at least until a broader court case is resolved.
The judge gave Coinbase 60 days to "make technological enhancements" to comply with the order.
Nevada and Washington's federal district courts are both part of the Ninth Circuit Court of Appeals.
Read more: Kalshi secures license to offer margin trading to institutional investors
UPDATE (March 28, 7:43 pm UTC): Updates story with comments from Kalshi's spokesperson.
UPDATE (March 28, 21:18 UTC): Adds additional context.
More For You
As stablecoins evolve into core financial infrastructure, North America leads. This report maps the regulation, market shifts, and players driving adoption.
Why it matters:
Stablecoins are entering their third phase of evolution - the institutionalization era - becoming increasingly embedded into core financial infrastructure. As institutions prioritize transparency and compliance, regulated issuers like USDC, RLUSD, and PYUSD are steadily gaining share with RLUSD surpassing $1B in market cap within its first year. North America, leading in regulatory frameworks and institutional distribution, is at the center of it all.
More For You
Bill C-25 follows years of warnings from Canada's Chief Electoral Officer about the risk that crypto donations could pose to electoral integrity.
What to know:
- Canada’s Bill C-25 would ban cryptocurrency, money order and prepaid card donations across the federal political system, closing a fundraising channel that has seen virtually no use since crypto was first permitted in 2019.
- The Chief Electoral Officer, who initially favored tighter regulation, shifted in 2024 to recommending an outright...
Facts Only
Washington state filed a lawsuit against Kalshi on Friday, alleging the company violates state gambling laws.
The lawsuit claims Kalshi offers products that function like sportsbooks and other gambling operations.
Washington state bans online gambling, but Kalshi's platform allows betting on events like elections, sports, and entertainment.
Nevada won a temporary restraining order against Kalshi the previous week, forcing the company to remove sports, entertainment, and election contracts from its platform in the state.
Nevada also secured a preliminary injunction against Coinbase, another prediction market provider, for similar offerings.
Kalshi has filed to move the Washington case to federal court, arguing it is already litigating these issues in other federal courts.
Kalshi's head of communication stated the company does not offer war markets, despite references in the attorney general's press release.
Kalshi argues its products are federally regulated derivatives contracts, not gambling.
The Commodity Futures Trading Commission (CFTC) Chair Mike Selig supports the view that prediction markets are appropriately regulated at the federal level.
Nevada's court order against Coinbase requires the company to pause its prediction market offerings in the state for at least 60 days.
Both Washington and Nevada are part of the Ninth Circuit Court of Appeals.
The legal dispute may ultimately be decided by the U.S. Supreme Court.
Executive Summary
Washington state has filed a lawsuit against Kalshi, a prediction market provider, alleging that the company violates state gambling laws by offering products that function similarly to sportsbooks and other gambling operations. The lawsuit claims Kalshi's platform allows users to bet on events like elections, sports, and entertainment, bypassing state regulations that tightly control online gambling. This follows a recent legal victory in Nevada, where a court issued a temporary restraining order against Kalshi, forcing it to remove certain contracts from its platform in the state. Nevada also secured a preliminary injunction against Coinbase, another prediction market provider, for similar offerings. Kalshi argues that its products are federally regulated derivatives contracts, not gambling, and has filed to move the Washington case to federal court. The legal dispute highlights a broader conflict between state gambling laws and federal oversight of prediction markets, with both sides claiming initial legal victories. The outcome could set a precedent for how these markets are regulated nationwide, potentially reaching the U.S. Supreme Court.
Kalshi and its supporters, including the Commodity Futures Trading Commission (CFTC), contend that prediction markets serve a legitimate purpose in forecasting real-world events and should be regulated at the federal level. Critics, including state attorneys general, argue that these platforms are essentially gambling operations that exploit regulatory loopholes and target vulnerable populations, such as college students. The legal battles in Washington and Nevada reflect a growing state-level crackdown on prediction markets, with courts now tasked with determining whether these platforms fall under state gambling laws or federal financial regulations. The resolution of these cases could have significant implications for the future of prediction markets and their role in financial and political forecasting.
Full Take
The strongest version of this narrative frames prediction markets as a legitimate financial tool for forecasting real-world events, regulated at the federal level under the CFTC. Proponents argue that these markets provide valuable data and should not be conflated with gambling, which is subject to state laws. Kalshi and its supporters emphasize that their products are derivatives contracts, not gambling operations, and that federal oversight ensures proper regulation. The legal battles in Washington and Nevada are portrayed as overreach by states attempting to impose gambling laws on a federally regulated industry.
However, the narrative also reveals patterns of semantic manipulation (ARC-0024) and motte-and-bailey (ARC-0043). Kalshi's argument hinges on the distinction between "prediction markets" and "gambling," yet the functionality of its platform—allowing users to bet on events with payouts based on odds—mirrors traditional gambling operations. The company's claim that it does not offer "war markets" while acknowledging contracts related to geopolitical events (e.g., Iran's Supreme Leader) suggests a strategic retreat to a more defensible position. Additionally, the framing of prediction markets as purely financial tools ignores the potential for addiction and exploitation, which states argue is a core concern.
The root cause of this conflict lies in the tension between state and federal regulatory authority, a longstanding issue in U.S. governance. The unstated assumption is that prediction markets are inherently distinct from gambling, despite their operational similarities. This echoes historical debates over financial innovation versus consumer protection, where new products often outpace regulatory frameworks. The implications for human agency are significant: if prediction markets are classified as gambling, users may face stricter protections, but if they remain federally regulated, they could operate with fewer safeguards against addiction and manipulation.
Key questions emerge: How should we define the boundary between financial instruments and gambling? What safeguards are necessary to protect vulnerable populations without stifling innovation? And how can federal and state regulators collaborate to create a coherent framework for these markets?
Counterstrike scan: If this were a coordinated influence campaign, the playbook would involve framing prediction markets as a legitimate financial tool while downplaying their gambling-like features, leveraging federal regulatory support to undermine state authority, and portraying state actions as overreach. The actual content aligns with this pattern to some extent, particularly in Kalshi's strategic use of federal jurisdiction to bypass state laws. However, the inclusion of state concerns about addiction and consumer protection suggests a balanced rather than purely manipulative narrative.
Patterns detected: ARC-0024 Semantic Manipulation, ARC-0043 Motte-and-Bailey