SEATTLE — Washington Attorney General Bob Ferguson filed a civil lawsuit Friday against Kalshi Inc., accusing the New York–based prediction-market operator of violating the state’s strict gambling statutes by allowing residents to trade on political and economic outcomes without a local license.
In a 22-page complaint lodged in King County Superior Court, prosecutors said Kalshi’s event contracts — which pay out if a specified future event occurs — “function identically to sports books” and therefore run afoul of Washington’s blanket prohibition on online gambling. The state is seeking civil penalties of up to $2,000 per violation and a permanent injunction blocking access to the platform.
Kalshi, which is registered with the U.S. Commodity Futures Trading Commission (CFTC) as a designated contract market, said in an emailed statement that it “disagrees with the Attorney General’s characterization” and will “vigorously defend our customers’ right to trade federally regulated contracts.”
The action makes Washington the third state this quarter to move against the two-year-old fintech. In January, Texas securities officials issued a cease-and-desist order, and Massachusetts regulators opened an inquiry into whether Kalshi’s congressional-control contracts amounted to unlicensed betting. The CFTC itself is still weighing an earlier Kalshi application to list contracts tied to which party wins control of the U.S. House and Senate, after a federal appeals court asked the agency to revisit its 2023 rejection.
“States are beginning to test the outer limits of federal pre-emption in the derivatives arena,” said Sara Blackwood, a derivatives counsel at the law firm WilmerHale, noting that Washington historically maintains one of the toughest anti-gambling regimes in the United States. “A adverse ruling here could spur similar suits elsewhere.”
Ferguson’s office alleges that at least 1,200 Kalshi accounts were opened by Washington residents and processed more than $7 million in wagers since mid-2022. Sources familiar with the probe said investigators traced IP addresses and credit-card billing data to establish jurisdiction.
Market-structure analysts say the suit may chill venture investment in so-called information markets. “Kalshi’s pitch is price discovery on real-world events,” said Stanford finance professor Robert Pettit. “If states start labeling that activity ‘gambling,’ the economics change overnight.”
The case is expected to proceed rapidly; a preliminary hearing is scheduled for April 18. Observers will watch whether the court sides with state regulators or defers to the CFTC’s authority — a decision that could define the regulatory map for prediction markets ahead of the 2024 U.S. elections.