Kalshi Sports Prediction Markets Blocked in New York and Washington

⏳ 3 min read

Kalshi, the federally licensed prediction market operator, suffered two major legal defeats within a week as Washington state and New York courts moved to block or restrict its sports event contracts. On July 21, 2026, King County Superior Court Judge John McHale granted a preliminary injunction halting Kalshi's sports prediction markets in Washington, ruling the platform likely ran an "illegal gambling operation" under state law. The ruling takes effect no earlier than August 5, pending further submissions.

The twin setbacks come at a commercially critical moment. Kalshi posted a record $31 billion in notional trading volume in June 2026 — a 70% month-on-month surge driven by the 2026 FIFA World Cup — with sports contracts accounting for roughly 85% of all trades. New York is the single largest regulated sports-betting state in the US, making its court loss an acute commercial wound.

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The Washington Ruling

Judge McHale sided with Washington Attorney General Nick Brown, who argued that Kalshi was operating "in direct violation" of state laws reserving sports wagering to tribal lands. The judge found the state showed "a likelihood of actual and substantial injury to Washington consumers from illegal gambling activities" and that consumer harm outweighed Kalshi's business interests.

Critically, McHale rejected Kalshi's central legal defence: that the federal Commodity Exchange Act (CEA) preempts state gambling law because its contracts are CFTC-regulated swaps, not bets. The judge wrote that Kalshi had "willfully ignored" a prior cease-and-desist from the Washington State Gambling Commission. The injunction's precise terms are pending a submission deadline of August 3.

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The New York Ruling

On July 10, 2026, U.S. District Judge Analisa Torres denied Kalshi's motion for a preliminary injunction against enforcement by the New York State Gaming Commission. Torres found that Kalshi had failed to show a likelihood of success on the merits of its CEA preemption argument. In weighing the public interest, she ruled that New York's goals — preventing gambling addiction, protecting sports integrity, and avoiding unregulated wagering — outweighed Kalshi's case for federal primacy.

The ruling follows an October 2025 cease-and-desist from New York regulators accusing Kalshi of offering unlicensed mobile sports wagering. Kalshi has appealed to the US Court of Appeals for the Second Circuit.

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State-by-State Scoreboard

State	Outcome	Court / Body	Status
New Jersey	Kalshi wins (2–1)	Third Circuit Court of Appeals	CEA preempts state gambling law — April 2026
New York	State wins	SDNY — Judge Torres	Injunction denied; Kalshi appealing to 2nd Circuit
Washington	State wins	King County Superior Court — Judge McHale	Prelim injunction granted; effective Aug 5, 2026
MA / MI / NV	State wins	Various state courts	Prior injunctions restricting Kalshi already in place
Minnesota	Kalshi wins	US District Court (D. Minn.)	Federal court blocked state ban — late July 2026

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Federal Fault Lines

The core legal dispute — whether the CEA exclusively governs Kalshi's sports-event contracts or whether states retain gambling enforcement authority — has now produced contradictory outcomes at the appellate and district levels. The Third Circuit's April 6, 2026 ruling in KalshiEX LLC v. Flaherty held 2–1 that Kalshi's contracts qualify as swaps under the CEA and that federal jurisdiction is exclusive — the first federal appellate court to rule on the question. That finding directly conflicts with the reasoning in both the New York and Washington decisions.

Meanwhile, the CFTC published a proposed rulemaking on June 10, 2026, establishing a formal contract-review framework. It would permit aggregate-outcome sports contracts (moneylines, point spreads) while banning contracts tied to individual player injuries, referee decisions, or other manipulation-prone outcomes. The public comment period closed July 27, 2026. A Supreme Court review now appears increasingly likely as circuit splits deepen.

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Impact on Operators and Bettors

For traditional licensed sportsbooks — FanDuel, DraftKings, BetMGM — the state court wins are commercially welcome. Kalshi's sports contracts directly compete for betting dollars without requiring state sports-betting licences, and its $31 billion June volume is already large enough to register in market-share conversations.

For bettors, the practical picture is fragmented:

• Users in New York, Washington, Massachusetts, Michigan, and Nevada face restricted or blocked access to Kalshi sports markets while litigation continues.
• Users in New Jersey retain access following the Third Circuit ruling.
• National access remains technically possible via Kalshi's CFTC registration, but state-level enforcement creates real-world blocks.
• The CFTC's proposed rule, if finalised, could eliminate a range of prop-style contracts regardless of how the preemption question resolves.

States have now won 19 of 23 injunction decisions against prediction markets, even as Kalshi's trading volumes continue to climb. The combination of record commercial growth and accelerating legal losses sets up what many expect to be an inevitable US Supreme Court intervention.

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Sources

Primary and authoritative sources consulted for this article, in order of citation.

Kalshi has willfully ignored a Washington State Gambling Commission notice stating that offering event-based contracts is not authorized in Washington state.

— Judge John McHale, King County Superior Court · Preliminary Injunction Ruling, July 21, 2026