Gambling site\u2014sorry, we mean \u201cprediction market\u201d\u2014Kalshi is pretty obviously running an illegal gambling site prohibited by Washington state law, a state judge ruled this week.<\/p>\n
In an Aug. 13 press release<\/a>, the state attorney general\u2019s office touted that King County Superior Court Judge John McHale sided with prosecutors and issued a \u201cfinal order<\/a>\u201d that Kalshi shut down most types of betting in the state. Kalshi has fought the preliminary injunction in court since mid-July.<\/p>\n McHale\u2019s order applies to all bets \u201crelated to sports, elections, politics, entertainment, culture, tech and science, or mentions,\u201d requires Kalshi implement a geofence by Sept. 2, 2026, and threatens penalties of $120,000 for every day Kalshi continues to operate without a geofence past that date. Bets on commodities, climate, economics, and finance aren\u2019t subject to the order.<\/p>\n The judge couldn\u2019t be clearer about his thoughts on Kalshi: it offers \u201conline gambling activities\u201d that \u201cKalshi refers to as a \u2018prediction market\u2019\u201d instead.<\/p>\n \u201cKalshi earns a transaction fee on each bet placed,\u201d McHale wrote, noting Kalshi never obtained a license with the state\u2019s Gambling Commission. \u201cEach bet risks money, relies in part on chance, and promises a payout to winners.\u201d<\/p>\n In addition to finding it likely that Kalshi\u2019s operations are illegal, McHale found that its ads were likely to trick a \u201creasonable consumer\u201d into believing Washington state allows gambling. In reality, virtually all betting is illegal<\/a> except on tribal land.<\/p>\n To be fair, Kalshi barely puts up the pretense of its legality under state law\u2014the New York Times<\/a> noted prosecutors cited Kalshi ads containing text like, \u201cI found a way to bet on the NFL even though we live in Washington.\u201d Instead, the company just insists that it does not have to comply with said state laws.<\/p>\n Federal law hands \u201cexclusive jurisdiction over our exchange\u201d to the U.S. Commodity Futures Trading Commission (CFTC), Kalshi spokesperson Jacki McGavi told Gizmodo via email. \u201cWe respectfully disagree with the court\u2019s decision and are considering all legal options.\u201d<\/p>\n For some weird reason, the statement also contained unprompted denials that the company offers markets on wildfires, \u201cwar, death, or terrorism.\u201d The next line in the statement linked to a tweet<\/a> from Kalshi co-founder and CEO Tarek Mansour on the \u201cdeath carveout\u201d it invoked to rule that the death of former Iranian Supreme Leader Ali Khamenei was not a form of \u201cleaving office\u201d by a particular date. So, clearly, there is some way of profiting off death on the site.<\/p>\n Kalshi is facing similar pushback from state authorities across the country, yet Trump and his cronies have latched onto prediction markets like a not-particularly-choosy sea lamprey onto a diseased shark. Trump-appointed CFTC chair Mike Selig has embraced<\/a> this interpretation of the Commodity Exchange Act, and the agency has sued multiple states (including Connecticut, Arizona, and Illinois) for attempting to regulate sites like Kalshi and its competitor Polymarket.<\/p>\n Earlier this week, the CFTC announced it had<\/a> \u201cordered [Kalshi] to continue to operate\u201d in the state of New York despite a state lawsuit similarly alleging Kalshi is illegal. It previously issued a similar order<\/a> in Michigan. (If you\u2019re confused how the CFTC can \u201corder\u201d a company to operate, it more or less argues Kalshi is legally obligated to process customer bets in the same manner that stock exchanges do trades.)<\/p>\n CFTC chair Mike Selig, whose main priorities have included legalizing ultra-risky<\/a> cryptocurrency derivatives, argued in a press release<\/a> in August that Congress \u201cdid not intend for derivatives exchanges to be regulated under a patchwork of state gaming laws.\u201d<\/p>\n This industry-friendly legal argument has provided crucial cover for \u201cprediction markets\u201d to claim they are operating as mostly unregulated businesses rather than illegal ones. It certainly doesn\u2019t help that this gigantic, multi-state legal brawl<\/a> takes place in a state of genuine uncertainty<\/a> as to whether, say, the Supreme Court will agree with the companies that the CFTC has sole jurisdiction.<\/p>\n