1. Washington Joins a Growing Legal Coalition
The state of Washington became the latest jurisdiction to take formal legal action against Kalshi on Friday, with Attorney General Nick Brown filing a civil complaint in King County Superior Court. The suit alleges that Kalshi's event-based contracts violate the Washington State Gambling Act, the Consumer Protection Act, and the Recovery of Money Lost at Gambling Act — and seeks to halt the company's operations in Washington, recover funds lost by state residents through the platform, and impose civil penalties. Washington's filing comes approximately one week after Nevada won an appeals court victory allowing it to obtain a temporary restraining order requiring Kalshi to cease offering sports, entertainment, and election contracts in that state — a restriction that triggered a two-week pause with a hearing on April 3 to determine whether the suspension would be extended.
2. The Core Legal Argument: Gambling by Another Name
At the centre of Washington's complaint is a definitional argument about what Kalshi's products actually are. Under Washington law, gambling is defined as staking or risking something of value upon the outcome of a contest of chance or a future contingent event. The state contends that every Kalshi contract — whether on sports results, election outcomes, Supreme Court decisions, Iran war developments, or the number of measles cases in a given year — meets that definition. Users stake money, the outcome is uncertain, and payouts are determined by whether the specified event occurs. The complaint alleges that Kalshi understands this characterisation and has deliberately avoided it by labelling its offering a "prediction market" — a term that is descriptive of the product's mechanics but carries no specific legal exemption under Washington gambling law. In the state's framing, calling a sportsbook a prediction market does not make it one.
3. The Marketing Evidence Washington Cited
The complaint leans heavily on Kalshi's own marketing materials to establish that the company was aware it was operating in states where its products were not legally authorised. The most notable exhibit is a Kalshi advertisement in which one person texts another that they "found a way to bet on the NFL even though we live in Washington." Attorney General Brown's office characterised this as evidence that Kalshi knowingly marketed its services as a workaround to state law. The complaint also alleged that Kalshi advertised itself as offering "legal betting," used language specifically designed to reach younger users including college students, and at one point attempted to recruit a 15-year-old as an influencer — an allegation that speaks to the platform's age-of-participant risk profile in Washington's regulatory view. The state's characterisation was stark: Brown stated publicly that for Kalshi, every event and every tragedy is a potential vehicle for Americans to risk their money.
4. Kalshi's Immediate Response: Federal Court Transfer
Kalshi moved quickly to transfer the Washington case to federal court, filing to remove the case from King County Superior Court on the grounds that the legal questions at issue — whether federal CFTC jurisdiction preempts state gambling laws — are already being litigated in other federal courts. The company's head of communications stated that Kalshi received no warning or prior dialogue from Washington authorities before the lawsuit was filed, and reiterated the platform's core legal position: Kalshi is a regulated, nationwide exchange subject to exclusive federal jurisdiction under the Commodity Futures Trading Commission's authority over designated contract markets. That position has been supported by CFTC Chair Mike Selig and the Trump administration, both of whom have argued that event contracts offered by CFTC-regulated exchanges fall outside the scope of state gambling regulation.
5. Nevada's Temporary Restraining Order and Coinbase's Involvement
One week before Washington's filing, Nevada secured a temporary restraining order against Kalshi following an appeals court ruling that allowed the Nevada Gaming Control Board to proceed with its motion. The order required Kalshi to remove its sports, entertainment, and election contracts from Nevada for at least 14 days, with the April 3 hearing determining whether the restriction would be extended. A separate preliminary injunction issued by Nevada District Judge Kristin Luis on March 26 targeted Coinbase — which partners with Kalshi to integrate prediction market access within its platform — ordering it to maintain a pause on sports, election, and entertainment contracts in Nevada. The judge gave Coinbase 60 days to make the technological enhancements needed to comply with the geographic restriction. Both Nevada and Washington are within the jurisdiction of the Ninth Circuit Court of Appeals, meaning appellate outcomes in Nevada's cases will establish precedent that directly affects Washington's litigation.
6. Arizona's Criminal Charges: A Different Category of Pressure
While Nevada and Washington have pursued civil enforcement routes, Arizona took a more aggressive approach earlier in March 2026, filing criminal charges against the entities behind Kalshi. The Arizona charges alleged that the company operated an illegal gambling business in the state without a licence and offered unlawful election wagering — making Arizona one of the first states to pursue criminal rather than civil accountability. Kalshi has filed its own preemptive lawsuit against Arizona, Utah, and Iowa in an effort to prevent anticipated enforcement actions in those states, reflecting a strategy of seeking federal court intervention before additional state-level proceedings can be initiated. The company is now facing or managing more than 20 civil lawsuits across multiple states, a litigation burden that is expanding rapidly alongside the platform's geographic footprint.
7. The Federal-State Jurisdictional Clash at the Heart of the Dispute
The fundamental legal question underlying every state lawsuit is one that has no settled answer: when a product meets the criteria for a financial derivative under federal law and the criteria for gambling under state law simultaneously, which regulatory framework governs? The Commodity Futures Trading Commission's position — supported by Chair Selig — is that event contracts offered by CFTC-registered designated contract markets are federal derivatives products subject to exclusive federal jurisdiction. States including Washington, Nevada, Arizona, New Jersey, and Tennessee have countered that this framing does not override state authority to regulate gambling within their borders. Legal experts who have analysed the litigation landscape have told CoinDesk that the question is likely to reach the U.S. Supreme Court, given its constitutional dimensions — involving both the scope of federal preemption and the Commerce Clause's reach into state regulatory authority.
8. The Coinbase-Kalshi Connection and Push Notification Controversy
The legal pressure on Kalshi is occurring simultaneously with controversy around Coinbase's promotion of prediction markets. Earlier in the week, Coinbase users reported receiving multiple unsolicited push notifications encouraging them to "predict" sports event outcomes during the March Madness basketball tournament — with several users describing the notifications as indistinguishable in tone from gambling advertising. Coinbase CEO Brian Armstrong responded publicly on Friday, attributing the notifications to a software bug and indicating the issue was being corrected. Armstrong acknowledged that while prediction markets may interest some users, they should not be pushed to customers who have not opted in. Nevada's March 26 preliminary injunction noted that Coinbase had partnered with Kalshi and did not dispute offering event-based contracts that Nevada considers sports pools under state law — a finding that creates legal exposure for Coinbase in Nevada and potentially other states.
9. What the Multiplication of State Lawsuits Means for the Industry
The pattern of state enforcement actions has moved from a legal curiosity to a material operational risk for prediction market platforms in the span of a few months. Nevada has achieved both a temporary restraining order and a preliminary injunction. Washington has now filed a civil complaint. Arizona has filed criminal charges. New Jersey and Tennessee have filed actions that federal intervention has temporarily stayed. Kalshi has filed preemptive suits in multiple states. At the institutional level, this growing patchwork of state restrictions complicates the platform's expansion story at exactly the moment it is trying to attract professional capital through margin trading and prime brokerage relationships. Institutional investors allocating to prediction markets need predictable, nationwide access — a characteristic that becomes increasingly difficult to guarantee when individual states can restrict specific contract categories through their courts.
10. The Path to the Supreme Court and What It Would Decide
The Supreme Court resolution that legal experts anticipate would address a question with implications well beyond prediction markets. If the Court affirms federal preemption — that CFTC-regulated event contracts cannot be classified or restricted as gambling by individual states — it would establish a nationwide regulatory floor that effectively supersedes state gambling frameworks for this product category. If the Court sides with the states — finding that federal derivatives classification does not preclude state gambling regulation — it would fragment the prediction market into a patchwork of state-by-state permissibility, with some states banning products that others permit. The outcome would also carry implications for how other federally regulated financial products are treated when states characterise them as gambling or otherwise regulated activities under local law. Kalshi's confidence in its legal position, as expressed by its communications team, rests on a reading of the preemption doctrine that has attracted support from the executive branch and federal regulators — but that has not yet been tested at the appellate and Supreme Court levels where its durability will ultimately be determined.