The State of Washington has filed a lawsuit against prediction market platform Kalshi, alleging that its “prediction market” platform amounts to illegal online gambling under state law. The complaint, filed in King County Superior Court by the Washington State Attorney General’s Office, accuses the company of violating the state’s Gambling Act and Consumer Protection Act. Authorities are seeking to halt Kalshi’s operations in Washington, recover money lost by residents, and impose civil penalties.
At the centre of the case is Kalshi’s core offering, which allows users to wager money on the outcome of a wide range of real-world events. These include sports matches, elections, global affairs and even highly specific scenarios such as what public figures might say during live broadcasts.
Strict gambling laws at the heart of the case
Washington maintains some of the nation’s strictest sports betting laws, limiting wagers to tribal casinos under state-tribal agreements. Washington forbids statewide access and requires that wagers be made in person on tribal territories, in contrast to the majority of states that allow more widespread mobile betting.
According to the complaint, Kalshi’s platform violates this framework by allowing users in Washington to place bets remotely. The state argues that staking money on uncertain future outcomes clearly meets its legal definition of gambling, regardless of how the product is branded.
In January, Washington lawmakers opened debate a bill that could ease the state’s strict sports betting rules by expanding online sportsbook options at tribal casinos and lifting the ban on betting on in-state college teams. The bill is led by Rep. Sharlett Mena, Chair of the House Committee on State Government & Tribal Relations, who is the prime sponsor. Rep. Chris Stearns has co-sponsored the bill alongside her, with support from Reps. Lauren Davis, Lisa Calligan, and Leavitt.
Allegations of bookmaking and consumer risk
The lawsuit alleges that Kalshi operates as an unlicensed bookmaker by facilitating wagers and collecting fees on each transaction. Regulators say the platform effectively acts as the “house”, particularly through internal mechanisms that ensure bets can be matched and processed.
Authorities also raise concerns about how Kalshi presents its services. By describing wagers as financial “event contracts” and encouraging users to “trade what you know”, the company may give the impression that users are making informed investments rather than engaging in gambling. The state argues this framing could be misleading and, therefore, in breach of consumer protection laws.
Concerns over addiction and platform design
The complaint cites research indicating that 10.3 per cent of online gamblers show signs of moderate to severe problem gambling, compared with 3.5 per cent among gamblers overall.
Washington is suing Kalshi for running an illegal betting operation. Kalshi tries to deceive governments and consumers by calling itself a ‘prediction market.’ If you spend a minute on their website, you’ll clock that this is a gambling site. They claim to offer a new financial… pic.twitter.com/EDgjmfnZFA
— Attorney General Nick Brown (@AGOWA) March 27, 2026
Officials argue that Kalshi’s design may encourage excessive use by offering constant betting opportunities and features that promote engagement. The platform includes social elements, rankings and real-time activity indicators, which can create a highly competitive and immersive environment.
Growing regulatory pressure across the US
Washington’s action is part of a wider wave of legal challenges facing Kalshi. Arizona authorities have filed criminal charges related to alleged illegal wagering. Nevada has temporarily blocked offering wagers on sports, politics, and entertainment on the platform until 3 April. Meanwhile, Ohio has classified Kalshi’s sports prediction contracts as gambling, placing them under state oversight.
At the same time, the Commodity Futures Trading Commission (CFTC) has argued that prediction markets fall under federal oversight, potentially setting up a jurisdictional dispute between state and federal authorities. In February, Michael Selig, chair of the CFTC, publicly asserted federal authority over prediction markets in a video and warned state regulators that any challenges would be met in court.
Circling back to Washington, the state is seeking a permanent injunction to stop Kalshi from operating in the state, along with restitution for affected consumers and financial penalties. Kalshi has previously denied similar allegations, maintaining that its platform operates as a regulated financial exchange rather than a gambling service.
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