Kalshi loses bid to lift Washington state event contracts ban

A federal court declined to lift Washington state's ban on event contracts, handing Kalshi a setback that the company's legal team had not publicly anticipated. The ruling adds a new front to a litigation map that already stretches from Connecticut to Montana to the Ninth Circuit — and it does something the other fronts haven't quite done: it holds at the state level without a tribal land question underneath it.

That distinction matters. The Ninth Circuit's ruling against Kalshi turned substantially on the Indian Gaming Regulatory Act — a specific statutory framework applied to a specific jurisdictional question about tribal lands. Washington's ban is different. It rests on state authority to regulate gaming within its borders, full stop. No IGRA overlay. No tribal sovereign interest as the organizing legal principle. Just a state saying: this is gambling, and we regulate gambling here.

Kalshi's argument is the same one Underdog is now pressing in Connecticut federal court, the same one Robinhood has filed, the same one the whole industry has run since the first cease-and-desist landed: that Commodity Exchange Act jurisdiction over designated contract markets preempts state gaming law under the Supremacy Clause. The logic is clean. A federally regulated DCM lists a contract. The CFTC has the power — and the exclusive mandate — to determine whether an event contract is contrary to the public interest. States don't get a parallel veto.

The problem is that federal preemption arguments are not self-executing. They require a court to find either field preemption — Congress has occupied the space so completely that states cannot act at all — or conflict preemption — the state law actually frustrates a federal objective. Washington's court, in declining to lift the ban, has signaled at minimum that neither showing was clearly established on the preliminary record. That is not a ruling on the merits, but it is a ruling on likelihood of success, and likelihood of success is what a preliminary injunction requires.

I have watched preemption arguments that look airtight in a brief perform considerably worse before a judge who is watching a state regulator describe what the platforms actually do. The gap between the legal theory and the factual record is where these cases get complicated. Kalshi operates a federally designated contract market. It is also, from a Washington state court's vantage point, offering residents the ability to place money on NFL outcomes. Both of those things are true simultaneously, and the law has not yet settled which truth governs.

The CFTC's continued silence on rulemaking — its refusal to formally determine whether sports event contracts are contrary to the public interest — leaves every one of these platforms arguing preemption in the abstract. Preemption works best when there is something concrete to be preempted: a federal rule, a federal determination, a specific exercise of federal authority that the state law disrupts. What the industry has instead is a federal agency that has taken no position and a Supremacy Clause argument that has to carry more weight than arguments of that type are typically asked to bear.