Kalshi faces another state-level deadline after a Washington judge ordered the prediction market operator to sharply restrict what users can trade within the state. The August 13 preliminary injunction requires Kalshi to begin geofencing Washington users from most of its event contracts, with a preliminary system due August 19 and full implementation required by September 2.
The decision is another setback for Kalshi's argument that its status as a federally regulated derivatives exchange puts its contracts under the exclusive authority of the Commodity Futures Trading Commission. Washington sees things differently, creating yet another legal showdown over where federal oversight ends and state authority begins.
Washington Draws a Line Around Kalshi Contracts
King County Superior Court Judge John McHale's order does not completely remove Kalshi from Washington. Users can still access certain contracts involving commodities, climate, economics and finance. The restrictions instead target several other major categories available on the platform. The order blocks Washington users from trading contracts involving:
- Sports
- Politics and elections
- Entertainment and culture
- Technology
- Science
Kalshi must also stop advertising the restricted contracts to consumers in Washington. Failure to complete the required geofencing by September 2 could result in penalties of $120,000 per day, unless Kalshi can convince the court that it made sufficient efforts to comply.
Kalshi and Washington See Two Different Rulebooks
Washington Attorney General Nick Brown sued Kalshi in March, arguing that many of its prediction markets violate state law. The Washington State Gambling Commission had already issued guidance in December 2025 stating that event-based contracts were not authorized in the state. McHale wrote that Kalshi had "willfully ignored" that notice.
Kalshi continues to maintain that the CFTC has exclusive jurisdiction over its exchange. Company spokesperson Jacki McGavick said Kalshi disagrees with the decision and is considering its legal options. A state appeals court has already rejected Kalshi's request to pause McHale's injunction while the dispute continues.
The CFTC is Backing Federal Authority
The timing makes the Washington fight particularly interesting because the CFTC has become increasingly vocal about state attempts to regulate prediction markets. CFTC Chair Michael S. Selig said Tuesday that Congress did not intend federally regulated derivatives exchanges to operate under a patchwork of state gaming laws. The commission has also intervened in legal fights involving states attempting to restrict prediction market platforms.
That puts Kalshi in an unusual position. A federal regulator is telling the company to continue operating under its federal framework, while individual states and courts impose restrictions on specific categories of contracts. If you are trying to follow prediction market regulation right now, that tension is quickly becoming one of the industry's defining legal questions.
September 2 Becomes the Date to Watch
Geofencing turns that larger legal argument into a very practical problem. Kalshi now has to build technology that can identify Washington users and prevent them from accessing restricted markets while keeping permitted categories available. That is considerably more complicated than simply shutting down the entire platform within state borders.
The Washington case itself is also far from finished. Brown is seeking civil penalties and the recovery of money lost by Washington users on Kalshi, while the company can continue challenging the state's authority. The preliminary injunction simply determines what happens while that broader case moves forward.
The Trade Handle Prediction Markets Take
We continue to see the same fundamental question surfacing across the country: Can states restrict contracts offered by a federally regulated prediction market? Washington has now given a clear answer at the preliminary stage, but the CFTC is pushing just as firmly in the opposite direction.
For prediction market operators, the immediate challenge may be building systems flexible enough to handle different rules from state to state. The bigger answer will likely come through appeals and higher courts rather than individual geofencing orders. Until then, you can expect geography to play an increasingly important role in determining which prediction markets Americans can actually access.