Washington’s lawsuit against prediction market platform Kalshi changed direction the same day it was filed, after the company moved the case from state court into federal court. This would change where the case will be heard and centers the dispute on federal law.
The complaint, filed in King County Superior Court by Attorney General Nick Brown and reviewed by ReadWrite, alleges that Kalshi operates an illegal online gambling platform. State lawyers say the company offers “a continuous and captivating stream of opportunities to bet money online on thousands of topics,” including sports, elections, public statements, and health-related metrics.
According to the filing, these activities meet Washington’s legal definition of gambling, which includes risking money on uncertain outcomes with the expectation of a payout. The state also argues the platform is available to users across Washington despite restrictions on most forms of internet gambling. The lawsuit follows state action targeting prediction markets, including a ban affecting similar services.
Kalshi responded by filing a notice of removal, transferring the case to federal court. In it, the company states it operates “a federally regulated derivatives exchange” where users trade event-based contracts rather than place bets.
The company says its platform is overseen by the Commodity Futures Trading Commission and falls under “exclusive federal jurisdiction.” It argues the case requires interpretation of federal statutes, including the Commodity Exchange Act, and therefore belongs in federal court.
Disputes involving Kalshi have emerged in several states, with different outcomes. In Massachusetts, regulators obtained an injunction restricting parts of the company’s operations. In Michigan, the attorney general filed a lawsuit alleging that certain sports-related contracts constitute unlicensed betting activity. In Arizona, a federal judge denied Kalshi’s emergency request in a criminal-related matter.
Kalshi’s filing references these cases and notes that similar issues are being considered in multiple federal appeals courts. The company argues that the differing rulings show an unresolved legal question involving federal and state authority.
By removing the case, Kalshi has not yet addressed the allegations in Washington’s complaint. The immediate issue before the court will be whether the case proceeds in federal court and how federal law applies.
The company also stated that it has not been formally served with the complaint and has not waived any defenses.
Featured image: Kalshi / Canva
