Washington order forces Kalshi to geofence as CFTC backs continued trading
A King County judge ordered Kalshi to sharply curtail covered event contracts in Washington, deepening a fight with the federal derivatives regulator over who sets the rules.
A King County Superior Court judge ordered Kalshi to sharply curtail most of its operations in Washington on Thursday, setting up a direct conflict with the federal regulator that oversees the prediction-market operator. The order requires the company to geofence Washington users from covered event contracts, according to The Seattle Times' report on the ruling. The report says the order sets a Sept. 2 compliance deadline and daily penalties if Kalshi fails to block the affected wagers.
A later federal appeals ruling added a new fault line to the dispute. The Ninth Circuit said Nevada may regulate Kalshi's sports contracts and that those contracts are not swaps under the Commodity Exchange Act, while the Third Circuit has taken the opposite view of state restrictions. The split raises the prospect of further appellate review, but it does not change the Washington order's immediate compliance requirements.
The state case calls the contracts gambling
Judge John McHale wrote that Kalshi operates an online betting platform and is likely violating Washington's Gambling Act and Consumer Protection Act, according to the order as quoted by the newspaper. The Washington attorney general's office had already announced a preliminary injunction in July, saying the company's sports and other event contracts fit the state's definition of gambling because customers risk something of value on future outcomes.
That finding applies to Washington law. It does not decide whether Kalshi's contracts are unlawful across the United States, and it does not automatically bind other prediction-market platforms. Polymarket is part of the wider state-versus-federal dispute, but the Washington order reported Thursday is directed at KalshiEX.
Federal authority points the other way
The Commodity Futures Trading Commission has argued that states cannot force a federally registered designated contract market to cancel executed trades or discriminate against residents. In a July 14 emergency action, the CFTC ordered Kalshi to fulfill open trades after a Michigan court order and said federal law requires a uniform national derivatives market.
The two positions leave Kalshi with a practical problem before the legal question is settled. The platform may have to restrict Washington access while continuing to argue that the state cannot regulate contracts approved under federal commodities law. The CFTC's position may support that challenge, but it does not erase a state court order on its own.
A narrow order with a wider consequence
The immediate test is operational: whether Kalshi can identify Washington users and prevent them from trading the contracts covered by the order. The broader fight is about whether sports and other event contracts belong inside the federal derivatives system or under state gambling rules. Coinbase and Robinhood have moved into the same market through partnerships and distribution, so the answer will matter beyond Kalshi even though this order targets one operator.
Neither the state ruling nor the CFTC action resolves the national conflict. Appeals, federal litigation and additional state cases will determine whether geofencing becomes the standard workaround or whether Congress or the courts settle the boundary.
