Key Points
- Kalshi was ordered by King County Superior Court Judge John McHale to implement complete GeoComply geofencing by September 2, 2026, failing which would cost the company $120,000 in daily fines since it had likely violated gambling laws in Washington.
- Washington has become the third state to geofence Kalshi, after Michigan and Nevada, while gaming lawyer Daniel Wallach expects about 10 states to limit Kalshi by 2027.
- Kalshi filed a reconsideration motion on August 21, arguing Washington allowed rival OG to keep operating under a non-enforcement deal, calling the enforcement selective and undercutting the state’s own consumer harm argument.
When Kalshi users in Washington opened the app this week and found their access gone, most had one question: what exactly did Kalshi do wrong? The answer, sitting inside a King County Superior Court order, is sharper than most headlines have captured.
Judge John McHale, in his order signed August 13, 2026, directed Kalshi to stop offering contracts tied to sports, elections, politics, entertainment, culture, technology, and science to Washington residents. Two deadlines followed: IP address and residency-based restrictions by August 19, and a full multi-source geofencing system built through GeoComply by September 2. Miss that second deadline without a sworn explanation, and the fine is $120,000 per day. Kalshi says it has already blocked Washington users. The harder question is what September 2 brings.
The State Saw This Coming Months Ago
Washington State’s Gambling Commission gave a written notification in December 2025, stating that Kalshi was not authorised to carry out its activities through the event-based contracts. Kalshi went on with its operations. The Attorney General, Nick Brown, initiated a lawsuit in March 2026 and stated that the company had been acting unlawfully by circumventing “some of the strictest gambling laws in the United States”, including the ban on online gambling, which had been enacted ever since the Legislature amended the Gambling Act of 1973 in 2006.
McHale ruled that a preliminary injunction would be appropriate in July 2026 after concluding that the state “has shown a likelihood of actual and substantial injury to Washington consumers from illegal gambling activities” and dismissed the argument of Kalshi that the federal Commodity Exchange Act preempted the state’s gambling laws. The August 13 order followed the same logic and outlined the deadlines for compliance and sanctions. The appeal court refused to stay the injunction while Kalshi appealed.
“Kalshi has gotten rich promoting wagers on sports, elections, natural disasters, events related to the Iran War, and more,” Brown said after the order. “Under this order, Kalshi is banned from offering wagers on most of those topics in Washington.”
The Two Words That Should Concern Kalshi Most
Most coverage has centred on the deadlines. The detail receiving far less attention is a specific phrase in McHale’s written ruling: he found that Kalshi “willfully ignored” the December 2025 notice from the Washington State Gambling Commission. That is not a neutral legal observation. It is a finding that Kalshi saw a regulator’s clear line, decided its federal licence made that line unenforceable, and kept going.
McHale also pointed to a Kalshi advertisement the AG’s office brought before the court, in which one person texts another that they “found a way to bet on the NFL even though we live in Washington.” The court treated that as evidence that Kalshi was not simply unaware of the state’s position. Spokesperson Jacki McGavick responded that Kalshi is “regulated by the CFTC, which has exclusive jurisdiction over our exchange,” adding it “respectfully disagrees with the court’s decision and is considering all legal options.”
Kalshi’s Counterpunch: Why Is OG Still Running?
On August 21, Kalshi filed a motion for reconsideration, and the argument it raised is difficult for Washington to dismiss cleanly. The filing pointed to an August 18 agreement between the Washington AG’s office and North American Derivatives Exchange, operating as OG, a Crypto.com brand. Washington agreed not to pursue enforcement against OG while federal appeals on the same preemption questions work through the Ninth Circuit. OG is also a CFTC-regulated designated contract market offering event contracts to Washington consumers. Kalshi’s position is that it is being shut down while an identically positioned competitor continues serving the same market.
“Kalshi is asking for the same treatment the Washington AG is giving other prediction markets who are free to operate while the litigation plays out,” Kalshi’s head of litigation Jovy Dedaj wrote on X, as reported by the Seattle Times. “This kind of arbitrary enforcement is exactly why prediction markets are regulated at the federal level in the first place.”
Washington’s Deputy Communications Director Mike Faulk pushed back directly: “Kalshi is the largest entity of its kind. Under the law, the attorney general does not have to simultaneously prosecute all entities potentially engaged in the same activity to obtain a judgment against one of them.” Judge McHale will hear the reconsideration motion on September 2, the same day the full GeoComply system must be live.
Three States Down, More in Line
Washington joins Michigan and Nevada as the third geofenced state. Nevada banned Kalshi in March 2026; Michigan followed with geofencing orders and potential $500,000 daily fines; Massachusetts applied restrictions earlier in the year.
Gaming attorney Daniel Wallach wrote this month that the over/under on geofenced states by early 2027 is 10 and advised taking the over, listing Utah, New York, Wisconsin, Connecticut, and Illinois as near-term possibilities. The four current jurisdictions cover roughly 9% of the US population. Each new restriction narrows Kalshi’s addressable market while competitors including Robinhood, Polymarket US, and DraftKings Predictions serve the same users unrestricted.
One Industry, Two Sets of Courts
The central question in every one of these disputes is unchanged: does CFTC regulation of a designated contract market preempt state gambling laws? Courts have answered it both ways. The CFTC filed an amicus brief with the Sixth Circuit asserting exclusive jurisdiction, calling state enforcement an “ongoing campaign of state encroachment.” The Third Circuit ruled in April 2026 that Kalshi’s sports contracts are likely swaps subject to exclusive federal jurisdiction. State courts in Washington, New York, Massachusetts, and Nevada have gone the other direction every time.
That divide makes the Ninth Circuit proceedings, covering Washington and Nevada, the most consequential still pending. A ruling against Kalshi there, alongside the Third Circuit win, would create a direct federal circuit conflict, typically enough to push a case toward the Supreme Court.
Expert Analysis
Kalshi has argued in court after court that geofencing would cause irreparable harm to its business. We think that argument is now its biggest liability. Each time the company deploys geofencing in another state, it tells the next judge that the harm is manageable and compliance is achievable. The “irreparable harm” defence is being quietly dismantled by Kalshi’s own actions.
The revenue picture makes this more urgent than the legal debate alone suggests. Kalshi’s trading volume hit $23.8 billion in 2025, with sports contracts driving over 90% of activity and 89% of revenue. Kalshi is not losing access to its fringe markets; it is losing access to the engine of its business.
What strikes us most is the OG situation. If Washington’s non-enforcement deal with OG survives scrutiny, it signals that states are not uniformly opposed to prediction markets; they are opposed to Kalshi specifically, because of how far it pushed into restricted territory after being warned to stop. Kalshi’s record in Washington, starting with the December 2025 notice it chose to ignore, gave the state every reason to make it the test case rather than the beneficiary of a grace period.
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