Washington Files Lawsuit Against Kalshi For Illegal Gambling Operations

Washington has filed a lawsuit against Kalshi, arguing that its prediction market platform constitutes illegal online gambling under state law. The complaint was submitted in King County Superior Court by the Washington State Attorney General’s Office.

Authorities claim the platform violates both the state’s Gambling Act and Consumer Protection Act. Hence, the state seeks to halt Kalshi’s operations, recover funds lost by residents and impose civil penalties.

Kalshi’s core product is central to this case, allowing users to wager the outcome of  diverse real-world events, including sports, elections, global trends and highly specific scenarios involving public figures.

Regulators argue that placing money on uncertain outcomes meets the legal definition of gambling, regardless of the product’s branding.

State gambling laws clash with remote prediction market access

Washington maintains one of the strictest betting frameworks in the United States. Legal wagering is limited to tribal casinos under state agreements, with bets required to be placed in person on tribal land.

The lawsuit argues that Kalshi’s platform bypasses this structure by allowing remote participation. This directly conflicts with state law, which does not permit statewide online betting access.

At the same time, lawmakers started deliberating on a bill to expand online sportsbook access via tribal operators and allow betting on in-state college teams in January.

The legislation is sponsored by Sharlett Mena, Chair of the House Committee on State Government and Tribal Relations. She is supported by Rep. Chris Stearns and others like Lauren Davis, Levitt, and Lisa Calligan. 

Authorities accuse Kalshi of acting as bookmaker and misleading users

The complaint alleges that Kalshi functions as an unlicensed bookmaker by allowing wagers and collecting transaction fees. So, the platform effectively operates as the house through various internal systems that match and process bets. 

Officials have also raised concerns about how the platform is presented to users. Kalshi markets its offering as financial “event contracts” and encourages users to “trade what you know.”

The state argues this framing could mislead users into believing they are making informed investments rather than gambling. Therefore, the brand is also in breach of consumer protection laws.

Growing regulatory pressure and federal-state tensions intensify

The complaint highlights concerns around user behaviour and platform design. Research cited in the filing suggests that 10.3% of online gamblers show signs of moderate to severe problem gambling, compared with 3.5% across all gambling activity.

Authorities argue that features such as social interaction tools and real-time activity indicators may encourage repeated engagement.

Washington’s case is part of a series of legal challenges facing Kalshi across the United States. Arizona has initiated legal action linked to alleged unlawful wagering, while Nevada has temporarily blocked certain contracts. Ohio has classified sports prediction contracts as gambling, placing them under state oversight.

At the federal level, the CFTC maintains that prediction markets fall under its authority. Chair Michael Selig has stated that federal oversight applies and warned that challenges from states could lead to legal confrontation.

Washington is seeking a permanent injunction to stop Kalshi from operating within its jurisdiction. The state is also pursuing restitution for affected users and financial penalties.

Kalshi has denied similar claims in the past, maintaining that its platform operates as a regulated financial exchange rather than a gambling service.